April 21, 2025 • 45 mins
Bob Stein provides perspective on likely economic outcomes that may result from the evolving policy mix of the new Trump Administration. Plus…Bob shares an early peak at potential contenders for the 2028 US Presidential election.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Ryan (00:09):
Hi, welcome to this episode of the First Trust ROI
podcast.
I'm Ryan Isakainen, etfstrategist at First Trust.
Today, I'm joined by Bob Stein,deputy Chief Economist at First
Trust.
Bob and I are going to talkabout the economy and what he
expects in the year ahead.
We're going to talk abouttariffs and tax rates.
We're going to talk about whathe thinks might happen in 2028,
(00:29):
as we have a new presidentialelection cycle starting very
soon.
Thanks for joining us on thisepisode.
So, bob, last time you joinedus on the First Trust ROI
podcast was right beforeelection day and you had some
forecasts that were prettyinteresting.
Some were a little bit outsideof consensus, some were.
You know, consensus had kind ofcome in your direction, I would
(00:51):
say.
So you got a lot right.
Congratulations on yourforecasting ability.
What surprised you most?
Bob (00:57):
Well, I got 49 of the 50 states for Trump.
The one I missed was Michigan.
So I was surprised by twothings.
Number one obviously he wonMichigan.
So I was surprised by twothings.
Number one obviously he wonMichigan.
So he did even better than Ithought he would.
And I was surprised by how wellhe did in the popular vote
nationwide.
I thought it would be reallyclose, maybe Harris winning by a
half point to maybe onepercentage point in the popular
(01:19):
vote.
But then Trump, from thatsituation in that scenario,
easily went in the ElectoralCollege.
But the fact that he won thepopular vote outright by a
percentage and a half was a bitof a surprise.
And within that I was mostsurprised by not by his increase
in minority support, which alot of people saw coming and I
(01:41):
did as well, but by his increasein youthful support, especially
among Gen Z.
They're much different than themillennials who kind of really
took to Obama and the DemocraticParty.
I think a lot of people wholived through COVID and
(02:06):
Generation Z and the shutdownsand all the draconian measures
that were taken in excess, withthe extra masking, as well as
seeing what happened on the newsthe previous four years, kind
of gravitated to the positionthat experts generally don't
know what they're talking about,and as the Democratic Party is
(02:30):
largely the party of theacademic class and the
self-described expert class,they were kind of repelled by
that as well.
Ryan (02:41):
What degree do you think the new forms of media, social
media, podcasts.
How did they contribute?
Do you think they were a big?
I mean, it seems to me thatthey contributed a lot but you
know, maybe I have a podcast soI try to put too much importance
on that.
Bob (02:56):
Exactly A little self-dealing there right.
So I think it's a big issue, andit's especially an issue for
the Democratic Party, or aproblem for the Democratic Party
relative to the RepublicanParty, because podcasts like
this one right now it's notscripted, I don't have a script,
I don't have any paper in frontof me, you're just asking me
questions and I'm free formingit right, and so it favors
(03:17):
people who are willing and ableto free form over people who
have a 30 second segment.
And so the classic difference Isee is with Trump going on
Rogan and talking for what?
Two and a half three hours Tothe point of tiredness.
I mean, that's why Rogan doesit.
He wants his guests to getmentally tired, and so they are
(03:39):
willing to speak more freely,more with their id and less with
their superego.
If you take a Freudianperspective on the show, on 60
Minutes they interview VicePresident Harris and slice and
dice her answers afterwards sothey sound great.
Well, I've heard onecommentator say this and I don't
know if this fits right, but apodcast inherently is a very
(04:04):
masculine enterprise.
You're taking a lot of riskwith it.
A scripted scenario where thingscan be spliced and diced to
show you exactly what thepurveyor wants to show you.
It's a more feminine way ofgoing about an interview, which
is not to say one is right orone is wrong, or one is better
(04:25):
or one is worse.
But it used to be that almosteverything came through the
scripted scenario, with slicingand dicing by editors who
favored one political side.
That's a scenario that favorsDemocrats.
Vice President Harris wasn'teven willing to go on the Rogan
show.
Now I suspect that other peoplewould be willing to go on, like
Gavin Newsom.
(04:45):
I think he'd be eager to go onand deal with it.
I think there are women on theDemocratic side who might be
eager to go on a podcast and mixit up like that.
So this is not uniquelyDemocrat versus Republican, but
I do think right now theDemocrats gravitate towards
scripted, sliced and diced,heavily edited media and that
(05:06):
media is dying.
And the podcasts and theInternet and authenticity and
being able to extemporaneouslytalk about politics and policy
issues.
That media is growing.
Now there is a Democraticcandidate who would do
exceptionally well in the newmedia enterprise and I've just
(05:28):
talked about him recently.
Ryan (05:29):
I know what you're going to say Stephen A Smith.
Bob (05:31):
He could talk off the top of his head about pretty much
any issue, kind of like DonaldTrump did in 2015 when he would
call into the media shows andlet CNN and MSNBC Morning, joe
and Micah take it away and hewould just talk for as long as
they wanted him on the show.
Stephen A Smith can do that.
I think he's a much moreformidable candidate potentially
(05:52):
on the Democratic side thanmany Democratic elites are
giving him credit for.
Ryan (05:56):
What percentage possibility do you think you
would put on him today to be thecandidate in 2028 for the
Democrats?
6.1 percent, ryan.
6.1?
Okay, I'll mark that down.
We're going to hold you to 6.1.
About 6 percent give or take.
Okay.
Well, I think that's higherthan most people would say.
Bob (06:15):
To put that in perspective.
I think the most likelyDemocratic candidate is Gavin
Newsom, but I'd only give him a15% chance.
So the gap between a Stephen ASmith or an AOC or a Gretchen
Whitmer or a Pete Buttigieg andthe top guy on the Democratic
side very, very small.
On the Republican side it'svery different.
So on the Republican side Iwould say JD Vance has a 65%
(06:39):
chance of being the nominee.
That high okay, everybody elsecombined.
And if you look at theprediction markets, I think
Coliseum is around 45%.
So I'm definitely taking theover on JD Vance.
And if I were a gambling man Iwould do that and, as you know,
I am a gambling man, so I wouldtake the over on JD Vance.
Everybody else combined 35%,including players to be named
(06:59):
later, you know Mike Pompeo,nicky Hayes, everybody,
everybody you could imagine.
Ryan (07:04):
Why do you think it's so high?
Why do you give him 65%?
Bob (07:08):
For JD Vance?
Yeah, because all he has to dois stay in Trump's good graces
and be in the public eye,generate very high name
recognition and if he can kindof inherit the MAGA mantle
without necessarily being Trumphimself, I think he could win
(07:30):
the Republican nomination evenmore forcefully than Trump did
originally in 2016.
Because I think he is a moregenerally a disciplined
politician than Trump was andcould avoid some of the mistakes
that Trump made along the wayin 2016 in alienating people he
didn't necessarily have toalienate.
Ryan (07:53):
So this is probably asking going down that rabbit hole too
far, but who do you think wouldbe a good VP pick for JD?
Bob (08:03):
I think JD JD Vance has already decided who his VP pick
would be if he were to get thenomination.
And when I say he has decided,he's decided who he wants to
pick, not who he will pick,because there might be political
constraints that arise over thenext three and a half years
that restrain him from pickingthat particular person, but I
(08:28):
think he wants Marco Rubio.
I heard there you know they'redecently close personal friends
JD Vance went to bat for MarcoRubio getting the Secretary of
State position appointed byPresident Trump.
Marco Rubio would kind ofsolidify the Republican
realignment or the realignmentamong Hispanic voters toward the
Republican Party.
(08:48):
He's very well spoken on theissues.
He's somewhat elegant, eloquent,elegant well, it would be
appropriate, but I think he'sknown a little bit more for it,
for his eloququence, and hewould also be a slight reaching
out to the more establishmentwing of the Republican Party,
(09:10):
without alienating MAGA people,because if Rubio stays in
Trump's good graces for two orfour years before he eventually
departs, it would be a moreseamless transition.
Now again, there are otherpeople that Vance would consider
, but I think that's the personhe wants to be able to pick the
most.
Ryan (09:29):
So you don't think Don Jr or Eric Trump have a chance to
throw their hat in the ring andextend the chip ring.
Bob (09:36):
I think there'll be some lip service, but in the end they
won't quite make the cut.
The other thing is that ifthere's anything that's really
proven on the Republican sideabout picking a female candidate
to be president or vicepresident, I mean you have
Donald Trump, and JD Vance arenot exactly who you would devise
in a lab to appeal to women, towomen voters or female voters
(10:01):
and yet they won the popularvote by a percentage point and a
half.
That ticket, the Trump vansticket, won the popular vote by
a percentage and a half againsta female vice president I'm
sorry, a female presidentialcandidate on the Democratic side
, right.
So if there's any lesson fromthat, it's the Republicans don't
necessarily have to pick afemale candidate in order to win
(10:22):
or even to beat a femalecandidate.
Ryan (10:25):
So another thing that you said last year you called the
federal budget the most recklessof your lifetime and lots of
deficit spending.
The Trump administration hastalked about dealing with some
of that spending, curtailing it,making things more efficient.
How optimistic are you aboutthe ability of the new
(10:47):
administration to actually comeup with a budget that's more
sound and even to reduce thegrowth of spending?
But I mean, I don't know ifthey're going to reduce spending
on an absolute level.
Bob (10:58):
I think it's going to be a stretch to reduce the dollar
amount of spending on anabsolute level.
Stretch to reduce the dollaramount of spending on an
absolute level.
And the reason is because somuch of it is completely out of
control from Congress and thepresident.
With legislation.
You have Social Security andentitlement it's baked in the
cake because you know how manyretirees there are, you know
(11:19):
death rates and everything likethat.
Medicare baked in the cake, andhealthcare generally improves
over time with innovation, andso there are products and
services available that weren'tavailable 10 or 20 or 30 years
ago.
Medicaid even if they reform it, it's not going to save money
in the short run.
It'll save money on the backend in the long run.
Then you have interest on thenational debt.
(11:40):
Then you have national defenseand I think in a multipolar
world, which is the world wherewe've been easing into over the
past couple of decades and isonly going to become more
multipolar, that calls for moredefense spending and more
military spending.
So if you take those fivecategories, that's 85% or so of
federal spending.
You're only talking about theother 15%, which is social,
(12:04):
discretionary spending, and I dothink that will probably end up
being lower on an absolutebasis, but not a ton lower.
It's not going to fall 50% oranything like that.
I think at most that's going tofall 10%.
At most they are going to cutback some agencies In addition
(12:27):
to USAID.
They're going to cut back onthe education department because
the president is going toassert his dominion over the
employees.
Congress can pass all the lawsthey want, saying such and such
must be done and such and suchelse must be done, and you have
to have somebody doing it doneand you have to have somebody
doing it.
But if the president is incharge of the executive branch
(12:48):
and he decides not to hire theperson to do X, y and Z who
supposedly had moneyappropriated for them to do X, y
and Z at the educationdepartment or some other agency,
well then it doesn't get donebecause the president controls
the executive branch himself andhe's going to assert more
authority in that regardprobably than any Republican
president in the modern era.
Ryan (13:07):
So one of the things that the Trump administration has
done was offer basicallyvoluntary layoffs to a lot of
the federal workforce, and I'mnot sure where we stand with
that today, but a significantdegree of, or a significant
number of people have taken that.
Not as many as they thought,maybe, and I'm not sure how many
(13:29):
people have been laid off moreproactively, but I guess, from
your perspective, how does thatimpact the unemployment picture
in the US, and is that somethingthat's enough to push the
economy into a recession?
What's the impact on theeconomy?
Bob (13:44):
I don't think that's going to have a significant
macroeconomic impact, and I saythat fully recognizing that it
has a big impact on theindividual lives of the people
who are laid off Absolutely.
But does it have a macroeconomicimpact over and above, say, the
reduction in spending that thefederal government does?
And I would say no, no, like inmy area where I live in northern
(14:06):
Virginia.
It may, but country as a wholenot so much.
We have to recognize, if youlook at the JOLTS report that
comes out from the LaborDepartment, every month in a
typical year not a month, but ina full year the private sector
in the US lays off about 20million people and many of those
people, the vast majority ofthem, go on to get a job
(14:27):
elsewhere.
That's 20 million people eachand every year.
In a good economic environment,20 million people get laid off.
These people do not get theirsob stories on 60 Minutes or on
the nightly news, the way thatsomebody who is sitting at a
desk in the federal governmentdoes, whether it's USAID or
elsewhere, which is kind ofamazing to me how self-absorbed
(14:51):
this old media complex is withfederal employment relative to
private employment, where peopleare being laid off literally
all the time in a normal year ina north 20 million people laid
off in a normal year.
Ryan (15:02):
I'm not counting quits so if it's like 200,000 federal
employees, I've seen numbersthat suggest maybe it'll be
200,000.
In the context of 20 million,that's 1%.
Yeah, it's 1% of the total.
Yeah, seems smaller when youput it that way.
Bob (15:16):
Yeah, it certainly does.
Remember you just look at theinitial unemployment claims
every week.
Okay, these are not people whoquit because you're not supposed
to file a claim if you quit.
These are people who were laidoff, discharged and haven't
found a new job yet.
So $200,000 a week and that'snot all inclusive of everybody
(15:37):
who's laid off, because somepeople are laid off, find a new
job right away or decide to dosomething else with their time.
So that's $200,000 a week,largely in the private sector.
So it matters, but from amacroeconomic perspective it's
really a drop in the bucket.
I do think long term there is abenefit to taking people who
(16:01):
are otherwise employed by thefederal government,
unproductively or otherwiseemployed by some sort of
non-governmental organizationthat was receiving very large
subsidies from the federalgovernment, who are other, who
are otherwise engaged inunproductive or under productive
invent endeavors, who are nowgoing to be operating in the
(16:23):
private hopefully for-profitsector, producing things that
people actually want to buy fora price they're willing to pay.
Ryan (16:29):
So that could actually, in the long term, boost economic
growth, maybe even boost thestandard of living of those
people that are now doingsomething that's more productive
.
Bob (16:39):
It enhances productivity absolutely.
Ryan (16:42):
So what do you think about Elon Musk's involvement in Doge
?
That's another thing that seemsto be a big controversy.
You know somebody who'sappointed by the president and
you know, obviously he's becomea polarizing figure, which is
kind of surprising in some sense, because you know he's a guy
(17:02):
that seems like appeals to a lotof what the left likes in terms
of electric vehicles, in termsof some of the other things that
he has done historically.
So maybe there's a lot in thatquestion.
But what do you think of whathe's doing at Doge?
Is he gonna be successful?
And some of it's what we'vebeen talking about.
Bob (17:20):
The first thing I'd like to bring up is that it's really
interesting how he is now apoint of even physical attack
for the left in the USA rightnow, to the point where he has
some of his cars burned atdealerships and destroyed.
People are keying his cars,cursing at people who are
(17:42):
driving Teslas around.
And here's somebody, elon Musk,who has developed the most
successful US entrepreneur ingreen automobiles and electric
automobiles, and it appears thatto the left, who you would have
(18:03):
thought would be all in onfighting climate change, it
actually seems to be moreimportant to them to get the
subsidies that their groups weregetting or that maybe other
groups were getting, and thatthey're upset that those other
groups aren't getting and thosegovernment jobs, than it is to
fight climate change.
They would rather hurt the guywho's trying to prevent climate
(18:28):
change and reduce carbonemissions if it means that they
could keep their subsidies fortheir non-governmental
organizations, and it calls intoquestion whether they actually
believe all that stuff aboutclimate change if it's more
important for them to supportgroups that are getting
government money and living onthe government dole what I call
(18:49):
basically these NGOs.
To me, in many respects, not allof them many of them do very
good work and are not how I'mabout to describe it.
Some of them appear to be likethe updated version of a welfare
king or queen, where they arebasically living off the
government dole, but they're notliving off the government dole
at subsistence, which is wherethe welfare payments used to be.
(19:09):
They're in an office andthey're making hundreds of
thousands of dollars a year,well more than the typical
American basically making moneyoff the government, and the
protesters don't like Muskbecause he's getting rid of that
.
That's more important thanclimate change, Really, okay, I
see what you think of climatechange.
Maybe you don't believe yourown rhetoric which is not to say
(19:32):
it's wrong.
Ryan (19:34):
But it reveals their priorities.
Bob (19:36):
It does, and I do think he's been very good about
pursuing two things.
Number one, the spending cutsand going after the agencies
that are much more deeplyentrenched with non-governmental
organizations.
Which brings me to anotherthing that I think he's trying
to pursue, and not just spendingcuts.
(19:57):
I think he's trying todismantle what he believes to be
the ecosystem of the politicalleft in the USA, where there are
these ties between thegovernment, non-governmental
organizations living off oftaxpayer money to run around the
world or the US as do-goodersdoing essentially secular
Christian missionary work, andthe media as well, and there's
(20:22):
this kind of iron triangle, ifyou will, as well as the
lobbyists, the law firms whosupport the NGOs, and he's
trying to break up theirnetworks by literally putting
them out of jobs, literallytaking their money away and
making them leave behind theirwork and enter the for-profit
sector of the US economy.
And I think, if you see it asnot just a measure to reduce
(20:46):
spending but to change theinstitutional structure of
American politics, what he'sdoing makes a lot more sense.
Ryan (20:57):
You know there's a theory that's floating around.
Interest rates are clearlyimportant to Trump.
You know he's a real estatedeveloper and obviously real
estate and interest ratesthey're closely linked.
And he's been very outspoken insuggesting that he thinks rates
should come down.
And there's a theory floatingaround that he wants to actually
(21:18):
tip the economy into arecession in order to bring
rates down because he wantslower interest rates.
Is that valid at all?
Bob (21:28):
I think it's utterly ridiculous, and here's why.
Yes, if there is a recession,interest rates will come down,
including on US Treasurysecurities.
However, the interest that thegovernment has to pay on
previously issued debt would notchange at all At all.
Okay, so almost all thosepayments would be exactly the
(21:49):
same.
Maybe the inflation index, thepayment, would change slightly
slightly, but in real terms itreally wouldn't.
So it wouldn't save us anymoney on the debt that's already
issued.
That would remain outstandingover and beyond this
recessionary period.
In the meantime, remember thatinterest on the national debt is
(22:09):
only about 3% of GDP.
Okay, but we spend well morethan 20% of GDP.
So interest on the nationaldebt, it might be like you know,
something like 15% of federalspending, which means the other
85% is not interest.
If we have a recession, revenuewill fall relative to what it
(22:31):
would otherwise be.
That makes all those otherspending commitments, not the
interest, which might go downgradually over several years,
gradually, but that other 85% ofspending.
Well, that's harder to financenow and the deficit would expand
, which means you would add tothe debt on a permanent basis.
So if that's what they'rethinking, they're crazy.
(22:55):
You would never want to tip soit'd be counterproductive is
what you're saying yeah, youwould never want to tip the
economy into a recession to helpyou finance the national debt.
That just would not make sense.
Now there's another relatedquestion, which is do they
understand that some of theirpolicies in the short run might
end up tipping the US economyinto recession?
(23:17):
Yes, absolutely, 100%.
Do they want a recession?
No, 100% against.
Whether it helps the US financesome of its future debt or not,
you wouldn't want a recession.
Some of its future debt or not,you wouldn't want a recession.
Ryan (23:30):
So they're willing to take some short-term pain, even if
it causes an economic recession,because they believe that on
the other side of that, it wouldcreate a higher level of
economic growth and prosperity.
Bob (23:42):
Which is exactly what happened in the 1980s, 81, 82,
brutal economy.
Now that in part was becausePaul Volcker was the chairman of
the Fed and Reagan inheriteddouble-digit persistent, not
transitory no one was sayingtransitory back then Persistent
double-digit inflation and theyhad to bring it down.
And because double-digitinflation had become had lasted
(24:06):
so long during the 1970s thatpeople assumed it would persist.
It's tougher to bring inflationdown when consumers don't
believe you'll persist at atighter monetary policy.
You have to get even tighterthan you would otherwise be.
And so in 81 and 82, we had abrutal recession.
Unemployment went up to 10percent.
(24:26):
We had a great economicrecovery beyond that and,
frankly, you know, if youinclude the Clinton expansion
after that which would not havehappened if he inherited very
high inflation left over fromthe 80s, if you include that
long 20 year period, it was abeautiful period for economic
growth in the US and it wasbrought to be because of the
(24:47):
tight monetary policy and thecorrections to public policy
that had to be made in 81 and 82.
Ryan (24:54):
So you used to work as an official at the Treasury
Department, right Correct?
Bob (25:00):
So am I in trial here so.
Ryan (25:04):
Mr Stein, how did they determine what the maturity of
some of that treasury debt isgoing to be?
How do they figure out like,okay, this is going to be five
years, this is going to be 10years, these are going to be
T-bills?
How does that process work?
Bob (25:18):
Okay, so I was not deeply involved in that.
I was on the macro economicside.
We have debt managers who aredeeply involved in that,
including mostly civil servants,who really do know what they're
doing in this regard, with oneexception.
I'll get to that exception in alittle while where I think
they're completely wrong, butgenerally speaking, they know
(25:38):
literally the date that all theTreasury securities that are
outstanding are coming due.
They also by working with theeconomic forecast that we in
part did at the TreasuryDepartment, the economic
forecast that we in part did atthe Treasury Department, as well
(26:01):
as people who are experts onhow that macroeconomic
environment will translate intotax receipts and literally what
day and what they expect taxreceipts to be Like.
There's literally a guy inthere who will know this is what
we expect literally every day.
This is what we got.
Ryan (26:14):
It's a big spreadsheet.
Bob (26:15):
Oh, absolutely Massive spreadsheet, because all
different sorts of revenue fromdifferent sources, whether it's
withheld income tax,non-withheld payroll tax,
revenue tariff, everything.
They have expectations day byday based on historical patterns
, day of the week, becausecertain payments are made.
And they also have that withspending because they're working
(26:37):
with the agencies fordisbursement.
That's why the TreasuryDepartment was the key and Musk
and Doge wanted to get into thatsystem, so they can understand
where is all the money going.
So they have expectationsliterally about spending and
receipts of all kinds day by day.
(26:59):
So they know what.
They have an idea of what theyexpect the deficit to be going
out months, and they can settheir debt issuance by security
type, based on when they have toroll things over and how the
Lord how much deficit they needto finance.
(27:19):
I guess a little dicey, orduring periods when you're a
budding, you know the deficit orthe debt is a budding, the the
legal limit and things have tochange a little bit.
But that's generally what Iexplained to you.
What they're doing here's whereI think they're completely off
base and this is more acombination of the civil
(27:40):
servants and the politicalpeople which is that they don't
really see the case for muchlonger debt issuance for the USA
, and I have dating back to thetime I was there.
So I've always thought that weshould start issuing maybe 100,
maybe even perpetual debt.
Perpetual debt doesn't meanit's outstanding forever.
The government could always buyit back at market prices.
(28:01):
But they're called consuls it'swhat the old British Empire
used to issue and the idea wouldbe to greatly lengthen the
average maturity of the US debt,which is right now about five
and a half years, which is notan unusual number by any stretch
, but I'd like to substantiallylengthen that to reduce our risk
profile.
(28:22):
And I totally understand andthis is the case that the debt
managers would make to me andthey'd talk to me slowly like
I'm an idiot and, ryan, you'veknown me for many years, so
maybe they're right, okay, butwhat they would say is listen,
bob, normally the yield curve isupwardly sloping, so if we
issue longer day-to-day onaverage, we're going to have to
pay more interest on average andour national debt will be a
(28:44):
little bit higher.
And my response was always doyou have term life insurance?
I mean, you're not going to beunhappy if you never collect on
that policy.
You're going to be really happybecause you're alive.
But what is term life?
You're not ripped off.
My term life whether it's, Idon't know, john Hancock or
whomever else has AIG.
I don't feel ripped off if thatterm life policy runs out.
(29:10):
That's the best case scenario.
Ryan (29:11):
Best case scenario it doesn policy runs out.
That's the best case scenario.
Best case scenario it doesn'tpay out Exactly.
Bob (29:14):
They aren't ripping me off, they're reducing risk.
So I'm willing to pay a premiumyou get that word premium each
and every year for a reductionin my family's risks, knowing
that chances are I'll nevercollect.
Well, I think taxpayers wouldbe willing to pay a premium
slightly higher average interestby year so that the debt
(29:35):
complex of the USA was much lessrisky, because if it's spread
out over hundreds of years,there's much less of a chance
that you'll run into a problemrefinancing the debt at any
particular point in time.
Ryan (29:50):
Okay, so here's a segue for you.
Speaking of revenue to thefederal government, let's talk
about taxes.
One of the biggest sources ofuncertainty today has to do with
tariff policies.
It seems like there's a lotgoing on there and maybe it's
(30:11):
difficult to interpret, becausemaybe they're being tariff
policies are being used as anegotiation tactic and the Trump
administration doesn't want toshow their hand.
But what's your opinion on whatthe Trump administration is
trying to accomplish with tariffpolicies and do you think
they're going to be successful?
Bob (30:29):
there's any one thing that Donald Trump has consistently
believed for the past 40 plusyears is that the US is hurt by
trade policy interaction withother country and that we need
more protectionism in the USA.
He has consistently it's theonly thing he has consistently
believed.
So I think that he believesthat tariffs would help the USA,
(30:52):
that it would help raiserevenue and it might do so
slightly and fix the tradebalance.
I think he's right on therevenue side, but on the trade
imbalance side, he's completelywrong.
We do not have a tradeimbalance because we're getting
messed with by other countriesand we cut too many free trade
deals.
We have a trade imbalancebecause the US is a fantastic
(31:16):
place to invest relative to therest of the world, and so people
around the world send us theircapital and because of that,
american companies and Americanconsumers can purchase more than
they produce.
So the question is is thissustainable?
Can they keep on sending us?
So the question is is thissustainable?
Can they keep on sending ustheir money?
I actually think it is, and thereason is because, even though
(31:37):
we are by far the world'sbiggest debtor, we owe the rest
of the world a heck of a lotmore than they owe us.
The interest we pay or thereturns we pay on their assets
here are minimal, very low,compared to the returns we make
on the investments we makeabroad.
So, even though we are the netdebtor, every year when you look
(32:02):
at the income flow, it comes inour direction.
It's as if you owed me $100,ryan, and I owed you $50.
You would be the net debtor,right.
But what if the deal on thehundred dollars I owe you is
that I have to pay you 10%interest per year and you have
to pay me 30% interest on the$50 you owe me?
(32:24):
I'm gonna debtor, but theincome flow is in my favor.
Every year You're peppy.
That's the situation the USA isin right now.
So we're the net debtor, but weon net make more off of that
exchange of assets and that, Ithink, is going to persist as
long as we're the world'sreserve currency and I expect
(32:44):
that to continue.
So as long as that persists, wecan have those flows to our
advantage, which means we cancontinue to run up debt that we
owe the rest of the world andthat means we can sustain these
big trade deficits.
If he raises tariffsconsistently, it's going to lead
to an appreciation of thedollar, and not every month
(33:07):
there, every week okay, butgenerally lead to an
appreciation of the dollar andthat appreciation will wipe out
the benefit he thinks therewould be from reducing the trade
deficit.
Ryan (33:19):
So do you think that the Trump administration just
doesn't understand the math thatyou just described for me?
Bob (33:26):
I think there are people in the Trump administration who
definitely understand it, butbeing a member of the
administration sometimesrequires a certain level of
telling the boss that he's agenius and, oh, he's right, and
people will just go along and dothat.
Ryan (33:43):
So you think the main purpose of the tariff policies
is to sort of rebalance thattrade imbalance as opposed to
other?
I guess what I'm getting withthis question is it seems like
it's somewhat linked with thebig beautiful tax bill that
Trump wants to pass, and I'mwondering if revenue from
(34:06):
tariffs would be counted whenthe CBOs I don't think that's
going to happen, ryan, andhere's why.
Bob (34:11):
If it's included in the bill, that means that you have
to take discretion away from thepresident, and he wants the
discretion to raise orpotentially lower tariffs
unilaterally.
He doesn't want his discretionlimited by Congress.
So that tariff revenue is notgoing to be part of the tax bill
(34:33):
.
I don't think I would besurprised by that, ryan.
So I don't think the increasedrevenue from tariffs is going to
be associated with that taxbill in a way that reduces the
net cost.
Ryan (34:47):
So feel free to dodge this question if you don't have an
opinion.
But I was recently in Canadafor work and everyone was
talking about the Trumppolicies-related tariffs on
Canadian goods.
And Mexico is another one thatthe Trump administration has
(35:09):
used tariffs as kind of puttingthem on, taking them off certain
categories.
It works, it doesn't.
Do you have any opinion?
What's going on there?
Bob (35:17):
I don't have a strong opinion or an opinion that I'm
very confident in.
One theory I have is that hisinteraction with Canada and
Mexico is designed to createchaos and a smokescreen, while
what he's really doing and drawattention away from the fact
that what he's really doing israising tariffs on China.
(35:39):
And so he'll talk about raisingtariffs on Canada and Mexico
and then back away.
Yeah, but he'll slap another10% on China that he doesn't
back away from.
So maybe he's creating adistraction politically.
Okay, but that's above my paygrade.
I don't know that.
That's just a theory.
Who?
Ryan (35:56):
am I to say?
A lot of people kind ofguessing at what the ultimate
objective is Now?
Bob (36:00):
do I think it's all about fentanyl?
I really doubt it.
I'm not saying it isn't, but Ilean against that.
You think there's?
Ryan (36:09):
something else happening, at least in addition to yeah?
Bob (36:13):
part of me thinks that like , yeah, they want to enact this
policy or talk about this policyvis-à-vis Canada.
And then when Kevin Hassett,the head of the National
Economic Council, is in the room, they go oh, kevin, this is not
an economic measure, we're justdoing this because of the
fentanyl.
And then he leaves the room andthey all laugh and they go oh
(36:34):
yeah, it's back to back totariff.
And then Kevin Hassett will goout in front of the cameras and
say, oh, it's really aboutfentanyl, and as far as he knows
it is, but he's not in the roomwhen they make the certain key
decisions.
Ryan (36:42):
I think Okay, so later this year there will have to be
a tax bill passed, because ifthere isn't a tax bill passed,
then individual tax rates willgo up next year.
Bob (36:52):
Correct, they'll go back to where they were in 2017.
Ryan (36:54):
So how do you think that this ends up playing out for
individuals and for corporationsCorporations?
If I'm not mistaken that taxrate of 21% is a permanent rate,
Correct?
Yes, but Trump has talked aboutnegotiating that as well.
So where do you think we land?
Bob (37:09):
So I think what's going to happen is we'll get a temporary
extension of the tax cut,originally in Athens 2017, which
itself was a temporary tax cut,not a permanent change in law
and I think the temporary natureof it will go maybe five, six,
seven years, and so we'll beback at it five, six or seven
years from now, talking aboutthis issue again.
(37:30):
I do think there'll be somechanges, though.
I think the corporate rate willprobably go down to 18 percent.
He talked about 15 percent onthe campaign trial.
I think that's a bridge too far.
There will be some sort of alimited tax relief for tips, but
that issue has to be writtenreally carefully because if they
don't, it's a massive loopholein the US tax code.
(37:51):
I think the state and local taxdeduction, which is near and
dear to the hearts of CaliforniaRepublicans and New York
Republicans and New JerseyRepublicans, who will have to be
included in voting for whatevertax credit extension happens,
because the Republican majorityin the House is so slender I
think that SALT deduction goesup, probably to somewhere in the
(38:12):
vicinity of $25,000.
It may even go higher, but togo higher, I think they would
have to pair it with a reductionor some limitation on the
corporate SALT deduction, whichback in 2017 they didn't do
anything about, which is alittle bit of a loophole Because
, ultimately, whether the stateand local tax deduction is taken
(38:34):
by individuals or companies, itinures the benefit of some
individual somewhere, whether anindividual taxpayer who earns
income or somebody who'sclipping dividends or getting
capital gains.
Ryan (38:47):
So that SALT deduction was once unlimited, correct?
Bob (38:50):
It used to be unlimited.
Yes, prior to 2017, essentiallyunlimited.
Ryan (38:54):
The reason that they can't make it unlimited again is
because the math all has to workin terms of making tax cuts
into the future somewhat revenueneutral.
Is that how it has to be?
Bob (39:06):
Well, it doesn't have to be revenue neutral.
I mean, they could in theorymake it unlimited again, but
that would massively increasethe cost, the scored cost, of
that tax cut.
Ryan (39:17):
OK.
Bob (39:18):
And there's only a certain amount of tax cut the
Republicans are willing to enactbased on optics, because,
remember, they have a slenderHouse majority and so the key
votes will come down to marginalmembers who are more moderate
than the fringe folks.
Key votes will come down tomarginal members who are more
moderate than the fringe folks,and so there's a certain optical
level that some members in theHouse and Senate might be
(39:39):
uncomfortable with AliciaMurkowski, susan Collins, tom
Tillis, whomever and so theyhave to have a number that they
agree with.
And the more they use to uncapor raise that SALT deduction,
and the more they use to uncapor raise that SALT deduction,
that's tax relief that can't beapplied for other reasons, like
marginal tax rates or tax relieffor tips or for some other form
(40:02):
of tax relief.
So I think, or the corporatecut down to 18, or maybe getting
it to 15 percent if Trump hashis way.
So I think that there arelimits.
The other thing is that,distributionally, once you get
above that, once you get above10,000, in fact, once you start
at zero or any soft deduction,you're really helping upscale
(40:24):
people.
And just so that the peopleknow at home, ryan, you are
hailing from the state of NewYork, which is a high-tax state.
It is very high-tax.
I come from a moderate-taxstate, the state of Virginia tax
state.
I come from a moderate taxstate, the state of Virginia.
So I would prefer to keepthings the way they are or maybe
reduce the state and local taxdeduction.
Ryan (40:40):
You obviously I say unlimited.
Bob (40:42):
Yeah, of course you say unlimited.
Ryan (40:44):
That's purely selfish reasons.
Bob (40:46):
Not ideological at all.
If I lived in New York, I wouldbe saying the same damn thing.
Ryan (40:53):
So why do you think five to seven years would be the
extent?
Is there an incentive from apolitical standpoint to want
those tax rates to expire?
Because then it gives you anissue to run on.
Bob (41:06):
I don't think it's that, although that's true, it's
described in Washington DC tosome extent as a milker.
What?
Is a milker.
Ryan (41:15):
A milker is like something's included in a DC to
some extent as a milker, okay.
Bob (41:16):
What is a milker?
A milker is like something'sincluded in a tax bill.
It usually refers to somethingthat's something minor that has
to be renewed every year or two.
Okay, like the R&D tax creditor something like that.
It's a milker, which is thatthe lobbyists are totally fine
with lobbying for a one ortwo-year extension, because then
(41:39):
their client is going to haveto keep them on retainer.
To come back to the Ways andMeans Committee and the Senate
Finance Committee and beg thosemembers to keep it going Was
that a part of any of yourcourses at Georgetown Is that
like?
you know, Milker 201 orsomething like that no.
Ryan, it's taught on the meanstreets of Washington DC and it
also from the members'perspective.
It's great because it means thelobbyist is going to have to
(42:00):
keep donating to your campaigns.
Right, because if you're in theHouse, especially on the Ways
and Means Committee, you'rerunning every two years.
So there's no better way tomilk the process overall than to
do this.
Now I'm using milker in aslightly different way, which is
to say that the RepublicanParty by doing this temporarily,
they can scare the daylightsout of people five, six, seven
(42:25):
years from now by saying hey, ifyou don't vote for us, the
Democrats are going to raisetaxes across the board,
including on you, so you bettercome out and vote for us.
Ryan (42:34):
So it's a milker in a slightly different sense okay,
but you don't think that that'sthe main reason why it's temper,
or do you know?
Bob (42:40):
I think the main reason is that they don't.
In order to make it permanent,it has to be fully offset with,
with, with spending cuts andthat are enacted in law, not
just doge going through theagencies, not just future
president, president's,eliminating workforce, riffing
(43:03):
workforce and stuff like that.
It has to be legislated, and sounless you're doing stuff on
entitlements, not SocialSecurity, social Security
campaign included, which, whichare tough votes for Medicare,
medicaid, things like that, orraising other taxes to offset it
, you can't make it permanent,and so you're better off just
doing it temporary and hoping tosignal to businesses and
(43:26):
consumers hey, we're going tokeep this going.
It's just going to take alittle bit of work legislatively
, but trust us, we're going tobe there for you.
Ryan (43:34):
The corporate tax rates were permanent.
That were cut back in the firstTrump administration.
How is that different?
Bob (43:42):
Because that portion was fully offset.
Oh okay, they can only offsetI'm using two opposing words
they can only fully offset partof it.
Oh okay, and so that was-.
That segment that segment waswas done separately.
Ryan (43:58):
Okay to make it permanent and in order to you mentioned
18% as a number that maybe thecorporate tax rate got to know
it came down to 21, no, no, butso in the future?
Under negotiation you saidmaybe they'd bring it down.
He talked about 15, they'dbring it to 18.
Would that have to be fullyoffset as well?
Bob (44:18):
If they want to make it permanent.
Yes, my guess is that's aportion they might make
temporary, so they don't have tocome up with.
Ryan (44:28):
See, now that brings me back to the Milker theory, if
that's what we're going to callit.
Bob (44:32):
I mean, you can't out-cyic me about Washington DC, ryan,
but Staying at 21%.
Ryan (44:37):
If I'm a business, I like the certainty of 21%.
Bob (44:40):
If it's permanent.
Ryan (44:41):
Because then someone has to actually go in and raise
taxes If I'm a business.
Bob (44:46):
I would be more than happy to accept 18% for some period of
time yeah, that's unknowablesome unknowable period of time.
If the most it would go back toonce it were no longer 18,
would be 21.
Ryan (45:01):
Oh, okay, that's a good point so you've out-Washingtoned
me again, bob.
This is why we the deepinsights from a former deep
state operative.
Okay, well, I'm looking at theclock.
Here I have about two hoursmore worth of questions for you
that we're not going to get totoday.
(45:21):
Why so little?
We can't?
You mentioned the Rogan methodof trying to tire the guest out
until they start to crack andgive you their true opinions.
We're not going to have achance to do that today, but I
do thank you for joining us onthis episode and we'll have you
back on real soon.
Bob (45:38):
Delighted to be on Looking forward to the next time All
right.
Ryan (45:40):
Thanks, bob, and thank you to all of you for joining us on
this episode of the First TrustROI Podcast.
We'll see you next time.
Hi, welcome to this episode of the First Trust ROI
podcast.
I'm Ryan Isakainen, etfstrategist at First Trust.
Today, I'm joined by Bob Stein,deputy Chief Economist at First
Trust.
Bob and I are going to talkabout the economy and what he
expects in the year ahead.
We're going to talk abouttariffs and tax rates.
We're going to talk about whathe thinks might happen in 2028,
(00:29):
as we have a new presidentialelection cycle starting very
soon.
Thanks for joining us on thisepisode.
So, bob, last time you joinedus on the First Trust ROI
podcast was right beforeelection day and you had some
forecasts that were prettyinteresting.
Some were a little bit outsideof consensus, some were.
You know, consensus had kind ofcome in your direction, I would
(00:51):
say.
So you got a lot right.
Congratulations on yourforecasting ability.
What surprised you most?
Bob (00:57):
Well, I got 49 of the 50 states for Trump.
The one I missed was Michigan.
So I was surprised by twothings.
Number one obviously he wonMichigan.
So I was surprised by twothings.
Number one obviously he wonMichigan.
So he did even better than Ithought he would.
And I was surprised by how wellhe did in the popular vote
nationwide.
I thought it would be reallyclose, maybe Harris winning by a
half point to maybe onepercentage point in the popular
(01:19):
vote.
But then Trump, from thatsituation in that scenario,
easily went in the ElectoralCollege.
But the fact that he won thepopular vote outright by a
percentage and a half was a bitof a surprise.
And within that I was mostsurprised by not by his increase
in minority support, which alot of people saw coming and I
(01:41):
did as well, but by his increasein youthful support, especially
among Gen Z.
They're much different than themillennials who kind of really
took to Obama and the DemocraticParty.
I think a lot of people wholived through COVID and
(02:06):
Generation Z and the shutdownsand all the draconian measures
that were taken in excess, withthe extra masking, as well as
seeing what happened on the newsthe previous four years, kind
of gravitated to the positionthat experts generally don't
know what they're talking about,and as the Democratic Party is
(02:30):
largely the party of theacademic class and the
self-described expert class,they were kind of repelled by
that as well.
Ryan (02:41):
What degree do you think the new forms of media, social
media, podcasts.
How did they contribute?
Do you think they were a big?
I mean, it seems to me thatthey contributed a lot but you
know, maybe I have a podcast soI try to put too much importance
on that.
Bob (02:56):
Exactly A little self-dealing there right.
So I think it's a big issue, andit's especially an issue for
the Democratic Party, or aproblem for the Democratic Party
relative to the RepublicanParty, because podcasts like
this one right now it's notscripted, I don't have a script,
I don't have any paper in frontof me, you're just asking me
questions and I'm free formingit right, and so it favors
(03:17):
people who are willing and ableto free form over people who
have a 30 second segment.
And so the classic difference Isee is with Trump going on
Rogan and talking for what?
Two and a half three hours Tothe point of tiredness.
I mean, that's why Rogan doesit.
He wants his guests to getmentally tired, and so they are
(03:39):
willing to speak more freely,more with their id and less with
their superego.
If you take a Freudianperspective on the show, on 60
Minutes they interview VicePresident Harris and slice and
dice her answers afterwards sothey sound great.
Well, I've heard onecommentator say this and I don't
know if this fits right, but apodcast inherently is a very
(04:04):
masculine enterprise.
You're taking a lot of riskwith it.
A scripted scenario where thingscan be spliced and diced to
show you exactly what thepurveyor wants to show you.
It's a more feminine way ofgoing about an interview, which
is not to say one is right orone is wrong, or one is better
(04:25):
or one is worse.
But it used to be that almosteverything came through the
scripted scenario, with slicingand dicing by editors who
favored one political side.
That's a scenario that favorsDemocrats.
Vice President Harris wasn'teven willing to go on the Rogan
show.
Now I suspect that other peoplewould be willing to go on, like
Gavin Newsom.
(04:45):
I think he'd be eager to go onand deal with it.
I think there are women on theDemocratic side who might be
eager to go on a podcast and mixit up like that.
So this is not uniquelyDemocrat versus Republican, but
I do think right now theDemocrats gravitate towards
scripted, sliced and diced,heavily edited media and that
(05:06):
media is dying.
And the podcasts and theInternet and authenticity and
being able to extemporaneouslytalk about politics and policy
issues.
That media is growing.
Now there is a Democraticcandidate who would do
exceptionally well in the newmedia enterprise and I've just
(05:28):
talked about him recently.
Ryan (05:29):
I know what you're going to say Stephen A Smith.
Bob (05:31):
He could talk off the top of his head about pretty much
any issue, kind of like DonaldTrump did in 2015 when he would
call into the media shows andlet CNN and MSNBC Morning, joe
and Micah take it away and hewould just talk for as long as
they wanted him on the show.
Stephen A Smith can do that.
I think he's a much moreformidable candidate potentially
(05:52):
on the Democratic side thanmany Democratic elites are
giving him credit for.
Ryan (05:56):
What percentage possibility do you think you
would put on him today to be thecandidate in 2028 for the
Democrats?
6.1 percent, ryan.
6.1?
Okay, I'll mark that down.
We're going to hold you to 6.1.
About 6 percent give or take.
Okay.
Well, I think that's higherthan most people would say.
Bob (06:15):
To put that in perspective.
I think the most likelyDemocratic candidate is Gavin
Newsom, but I'd only give him a15% chance.
So the gap between a Stephen ASmith or an AOC or a Gretchen
Whitmer or a Pete Buttigieg andthe top guy on the Democratic
side very, very small.
On the Republican side it'svery different.
So on the Republican side Iwould say JD Vance has a 65%
(06:39):
chance of being the nominee.
That high okay, everybody elsecombined.
And if you look at theprediction markets, I think
Coliseum is around 45%.
So I'm definitely taking theover on JD Vance.
And if I were a gambling man Iwould do that and, as you know,
I am a gambling man, so I wouldtake the over on JD Vance.
Everybody else combined 35%,including players to be named
(06:59):
later, you know Mike Pompeo,nicky Hayes, everybody,
everybody you could imagine.
Ryan (07:04):
Why do you think it's so high?
Why do you give him 65%?
Bob (07:08):
For JD Vance?
Yeah, because all he has to dois stay in Trump's good graces
and be in the public eye,generate very high name
recognition and if he can kindof inherit the MAGA mantle
without necessarily being Trumphimself, I think he could win
(07:30):
the Republican nomination evenmore forcefully than Trump did
originally in 2016.
Because I think he is a moregenerally a disciplined
politician than Trump was andcould avoid some of the mistakes
that Trump made along the wayin 2016 in alienating people he
didn't necessarily have toalienate.
Ryan (07:53):
So this is probably asking going down that rabbit hole too
far, but who do you think wouldbe a good VP pick for JD?
Bob (08:03):
I think JD JD Vance has already decided who his VP pick
would be if he were to get thenomination.
And when I say he has decided,he's decided who he wants to
pick, not who he will pick,because there might be political
constraints that arise over thenext three and a half years
that restrain him from pickingthat particular person, but I
(08:28):
think he wants Marco Rubio.
I heard there you know they'redecently close personal friends
JD Vance went to bat for MarcoRubio getting the Secretary of
State position appointed byPresident Trump.
Marco Rubio would kind ofsolidify the Republican
realignment or the realignmentamong Hispanic voters toward the
Republican Party.
(08:48):
He's very well spoken on theissues.
He's somewhat elegant, eloquent,elegant well, it would be
appropriate, but I think he'sknown a little bit more for it,
for his eloququence, and hewould also be a slight reaching
out to the more establishmentwing of the Republican Party,
(09:10):
without alienating MAGA people,because if Rubio stays in
Trump's good graces for two orfour years before he eventually
departs, it would be a moreseamless transition.
Now again, there are otherpeople that Vance would consider
, but I think that's the personhe wants to be able to pick the
most.
Ryan (09:29):
So you don't think Don Jr or Eric Trump have a chance to
throw their hat in the ring andextend the chip ring.
Bob (09:36):
I think there'll be some lip service, but in the end they
won't quite make the cut.
The other thing is that ifthere's anything that's really
proven on the Republican sideabout picking a female candidate
to be president or vicepresident, I mean you have
Donald Trump, and JD Vance arenot exactly who you would devise
in a lab to appeal to women, towomen voters or female voters
(10:01):
and yet they won the popularvote by a percentage point and a
half.
That ticket, the Trump vansticket, won the popular vote by
a percentage and a half againsta female vice president I'm
sorry, a female presidentialcandidate on the Democratic side
, right.
So if there's any lesson fromthat, it's the Republicans don't
necessarily have to pick afemale candidate in order to win
(10:22):
or even to beat a femalecandidate.
Ryan (10:25):
So another thing that you said last year you called the
federal budget the most recklessof your lifetime and lots of
deficit spending.
The Trump administration hastalked about dealing with some
of that spending, curtailing it,making things more efficient.
How optimistic are you aboutthe ability of the new
(10:47):
administration to actually comeup with a budget that's more
sound and even to reduce thegrowth of spending?
But I mean, I don't know ifthey're going to reduce spending
on an absolute level.
Bob (10:58):
I think it's going to be a stretch to reduce the dollar
amount of spending on anabsolute level.
Stretch to reduce the dollaramount of spending on an
absolute level.
And the reason is because somuch of it is completely out of
control from Congress and thepresident.
With legislation.
You have Social Security andentitlement it's baked in the
cake because you know how manyretirees there are, you know
(11:19):
death rates and everything likethat.
Medicare baked in the cake, andhealthcare generally improves
over time with innovation, andso there are products and
services available that weren'tavailable 10 or 20 or 30 years
ago.
Medicaid even if they reform it, it's not going to save money
in the short run.
It'll save money on the backend in the long run.
Then you have interest on thenational debt.
(11:40):
Then you have national defenseand I think in a multipolar
world, which is the world wherewe've been easing into over the
past couple of decades and isonly going to become more
multipolar, that calls for moredefense spending and more
military spending.
So if you take those fivecategories, that's 85% or so of
federal spending.
You're only talking about theother 15%, which is social,
(12:04):
discretionary spending, and I dothink that will probably end up
being lower on an absolutebasis, but not a ton lower.
It's not going to fall 50% oranything like that.
I think at most that's going tofall 10%.
At most they are going to cutback some agencies In addition
(12:27):
to USAID.
They're going to cut back onthe education department because
the president is going toassert his dominion over the
employees.
Congress can pass all the lawsthey want, saying such and such
must be done and such and suchelse must be done, and you have
to have somebody doing it doneand you have to have somebody
doing it.
But if the president is incharge of the executive branch
(12:48):
and he decides not to hire theperson to do X, y and Z who
supposedly had moneyappropriated for them to do X, y
and Z at the educationdepartment or some other agency,
well then it doesn't get donebecause the president controls
the executive branch himself andhe's going to assert more
authority in that regardprobably than any Republican
president in the modern era.
Ryan (13:07):
So one of the things that the Trump administration has
done was offer basicallyvoluntary layoffs to a lot of
the federal workforce, and I'mnot sure where we stand with
that today, but a significantdegree of, or a significant
number of people have taken that.
Not as many as they thought,maybe, and I'm not sure how many
(13:29):
people have been laid off moreproactively, but I guess, from
your perspective, how does thatimpact the unemployment picture
in the US, and is that somethingthat's enough to push the
economy into a recession?
What's the impact on theeconomy?
Bob (13:44):
I don't think that's going to have a significant
macroeconomic impact, and I saythat fully recognizing that it
has a big impact on theindividual lives of the people
who are laid off Absolutely.
But does it have a macroeconomicimpact over and above, say, the
reduction in spending that thefederal government does?
And I would say no, no, like inmy area where I live in northern
(14:06):
Virginia.
It may, but country as a wholenot so much.
We have to recognize, if youlook at the JOLTS report that
comes out from the LaborDepartment, every month in a
typical year not a month, but ina full year the private sector
in the US lays off about 20million people and many of those
people, the vast majority ofthem, go on to get a job
(14:27):
elsewhere.
That's 20 million people eachand every year.
In a good economic environment,20 million people get laid off.
These people do not get theirsob stories on 60 Minutes or on
the nightly news, the way thatsomebody who is sitting at a
desk in the federal governmentdoes, whether it's USAID or
elsewhere, which is kind ofamazing to me how self-absorbed
(14:51):
this old media complex is withfederal employment relative to
private employment, where peopleare being laid off literally
all the time in a normal year ina north 20 million people laid
off in a normal year.
Ryan (15:02):
I'm not counting quits so if it's like 200,000 federal
employees, I've seen numbersthat suggest maybe it'll be
200,000.
In the context of 20 million,that's 1%.
Yeah, it's 1% of the total.
Yeah, seems smaller when youput it that way.
Bob (15:16):
Yeah, it certainly does.
Remember you just look at theinitial unemployment claims
every week.
Okay, these are not people whoquit because you're not supposed
to file a claim if you quit.
These are people who were laidoff, discharged and haven't
found a new job yet.
So $200,000 a week and that'snot all inclusive of everybody
(15:37):
who's laid off, because somepeople are laid off, find a new
job right away or decide to dosomething else with their time.
So that's $200,000 a week,largely in the private sector.
So it matters, but from amacroeconomic perspective it's
really a drop in the bucket.
I do think long term there is abenefit to taking people who
(16:01):
are otherwise employed by thefederal government,
unproductively or otherwiseemployed by some sort of
non-governmental organizationthat was receiving very large
subsidies from the federalgovernment, who are other, who
are otherwise engaged inunproductive or under productive
invent endeavors, who are nowgoing to be operating in the
(16:23):
private hopefully for-profitsector, producing things that
people actually want to buy fora price they're willing to pay.
Ryan (16:29):
So that could actually, in the long term, boost economic
growth, maybe even boost thestandard of living of those
people that are now doingsomething that's more productive
.
Bob (16:39):
It enhances productivity absolutely.
Ryan (16:42):
So what do you think about Elon Musk's involvement in Doge
?
That's another thing that seemsto be a big controversy.
You know somebody who'sappointed by the president and
you know, obviously he's becomea polarizing figure, which is
kind of surprising in some sense, because you know he's a guy
(17:02):
that seems like appeals to a lotof what the left likes in terms
of electric vehicles, in termsof some of the other things that
he has done historically.
So maybe there's a lot in thatquestion.
But what do you think of whathe's doing at Doge?
Is he gonna be successful?
And some of it's what we'vebeen talking about.
Bob (17:20):
The first thing I'd like to bring up is that it's really
interesting how he is now apoint of even physical attack
for the left in the USA rightnow, to the point where he has
some of his cars burned atdealerships and destroyed.
People are keying his cars,cursing at people who are
(17:42):
driving Teslas around.
And here's somebody, elon Musk,who has developed the most
successful US entrepreneur ingreen automobiles and electric
automobiles, and it appears thatto the left, who you would have
(18:03):
thought would be all in onfighting climate change, it
actually seems to be moreimportant to them to get the
subsidies that their groups weregetting or that maybe other
groups were getting, and thatthey're upset that those other
groups aren't getting and thosegovernment jobs, than it is to
fight climate change.
They would rather hurt the guywho's trying to prevent climate
(18:28):
change and reduce carbonemissions if it means that they
could keep their subsidies fortheir non-governmental
organizations, and it calls intoquestion whether they actually
believe all that stuff aboutclimate change if it's more
important for them to supportgroups that are getting
government money and living onthe government dole what I call
(18:49):
basically these NGOs.
To me, in many respects, not allof them many of them do very
good work and are not how I'mabout to describe it.
Some of them appear to be likethe updated version of a welfare
king or queen, where they arebasically living off the
government dole, but they're notliving off the government dole
at subsistence, which is wherethe welfare payments used to be.
(19:09):
They're in an office andthey're making hundreds of
thousands of dollars a year,well more than the typical
American basically making moneyoff the government, and the
protesters don't like Muskbecause he's getting rid of that
.
That's more important thanclimate change, Really, okay, I
see what you think of climatechange.
Maybe you don't believe yourown rhetoric which is not to say
(19:32):
it's wrong.
Ryan (19:34):
But it reveals their priorities.
Bob (19:36):
It does, and I do think he's been very good about
pursuing two things.
Number one, the spending cutsand going after the agencies
that are much more deeplyentrenched with non-governmental
organizations.
Which brings me to anotherthing that I think he's trying
to pursue, and not just spendingcuts.
(19:57):
I think he's trying todismantle what he believes to be
the ecosystem of the politicalleft in the USA, where there are
these ties between thegovernment, non-governmental
organizations living off oftaxpayer money to run around the
world or the US as do-goodersdoing essentially secular
Christian missionary work, andthe media as well, and there's
(20:22):
this kind of iron triangle, ifyou will, as well as the
lobbyists, the law firms whosupport the NGOs, and he's
trying to break up theirnetworks by literally putting
them out of jobs, literallytaking their money away and
making them leave behind theirwork and enter the for-profit
sector of the US economy.
And I think, if you see it asnot just a measure to reduce
(20:46):
spending but to change theinstitutional structure of
American politics, what he'sdoing makes a lot more sense.
Ryan (20:57):
You know there's a theory that's floating around.
Interest rates are clearlyimportant to Trump.
You know he's a real estatedeveloper and obviously real
estate and interest ratesthey're closely linked.
And he's been very outspoken insuggesting that he thinks rates
should come down.
And there's a theory floatingaround that he wants to actually
(21:18):
tip the economy into arecession in order to bring
rates down because he wantslower interest rates.
Is that valid at all?
Bob (21:28):
I think it's utterly ridiculous, and here's why.
Yes, if there is a recession,interest rates will come down,
including on US Treasurysecurities.
However, the interest that thegovernment has to pay on
previously issued debt would notchange at all At all.
Okay, so almost all thosepayments would be exactly the
(21:49):
same.
Maybe the inflation index, thepayment, would change slightly
slightly, but in real terms itreally wouldn't.
So it wouldn't save us anymoney on the debt that's already
issued.
That would remain outstandingover and beyond this
recessionary period.
In the meantime, remember thatinterest on the national debt is
(22:09):
only about 3% of GDP.
Okay, but we spend well morethan 20% of GDP.
So interest on the nationaldebt, it might be like you know,
something like 15% of federalspending, which means the other
85% is not interest.
If we have a recession, revenuewill fall relative to what it
(22:31):
would otherwise be.
That makes all those otherspending commitments, not the
interest, which might go downgradually over several years,
gradually, but that other 85% ofspending.
Well, that's harder to financenow and the deficit would expand
, which means you would add tothe debt on a permanent basis.
So if that's what they'rethinking, they're crazy.
(22:55):
You would never want to tip soit'd be counterproductive is
what you're saying yeah, youwould never want to tip the
economy into a recession to helpyou finance the national debt.
That just would not make sense.
Now there's another relatedquestion, which is do they
understand that some of theirpolicies in the short run might
end up tipping the US economyinto recession?
(23:17):
Yes, absolutely, 100%.
Do they want a recession?
No, 100% against.
Whether it helps the US financesome of its future debt or not,
you wouldn't want a recession.
Some of its future debt or not,you wouldn't want a recession.
Ryan (23:30):
So they're willing to take some short-term pain, even if
it causes an economic recession,because they believe that on
the other side of that, it wouldcreate a higher level of
economic growth and prosperity.
Bob (23:42):
Which is exactly what happened in the 1980s, 81, 82,
brutal economy.
Now that in part was becausePaul Volcker was the chairman of
the Fed and Reagan inheriteddouble-digit persistent, not
transitory no one was sayingtransitory back then Persistent
double-digit inflation and theyhad to bring it down.
And because double-digitinflation had become had lasted
(24:06):
so long during the 1970s thatpeople assumed it would persist.
It's tougher to bring inflationdown when consumers don't
believe you'll persist at atighter monetary policy.
You have to get even tighterthan you would otherwise be.
And so in 81 and 82, we had abrutal recession.
Unemployment went up to 10percent.
(24:26):
We had a great economicrecovery beyond that and,
frankly, you know, if youinclude the Clinton expansion
after that which would not havehappened if he inherited very
high inflation left over fromthe 80s, if you include that
long 20 year period, it was abeautiful period for economic
growth in the US and it wasbrought to be because of the
(24:47):
tight monetary policy and thecorrections to public policy
that had to be made in 81 and 82.
Ryan (24:54):
So you used to work as an official at the Treasury
Department, right Correct?
Bob (25:00):
So am I in trial here so.
Ryan (25:04):
Mr Stein, how did they determine what the maturity of
some of that treasury debt isgoing to be?
How do they figure out like,okay, this is going to be five
years, this is going to be 10years, these are going to be
T-bills?
How does that process work?
Bob (25:18):
Okay, so I was not deeply involved in that.
I was on the macro economicside.
We have debt managers who aredeeply involved in that,
including mostly civil servants,who really do know what they're
doing in this regard, with oneexception.
I'll get to that exception in alittle while where I think
they're completely wrong, butgenerally speaking, they know
(25:38):
literally the date that all theTreasury securities that are
outstanding are coming due.
They also by working with theeconomic forecast that we in
part did at the TreasuryDepartment, the economic
forecast that we in part did atthe Treasury Department, as well
(26:01):
as people who are experts onhow that macroeconomic
environment will translate intotax receipts and literally what
day and what they expect taxreceipts to be Like.
There's literally a guy inthere who will know this is what
we expect literally every day.
This is what we got.
Ryan (26:14):
It's a big spreadsheet.
Bob (26:15):
Oh, absolutely Massive spreadsheet, because all
different sorts of revenue fromdifferent sources, whether it's
withheld income tax,non-withheld payroll tax,
revenue tariff, everything.
They have expectations day byday based on historical patterns
, day of the week, becausecertain payments are made.
And they also have that withspending because they're working
(26:37):
with the agencies fordisbursement.
That's why the TreasuryDepartment was the key and Musk
and Doge wanted to get into thatsystem, so they can understand
where is all the money going.
So they have expectationsliterally about spending and
receipts of all kinds day by day.
(26:59):
So they know what.
They have an idea of what theyexpect the deficit to be going
out months, and they can settheir debt issuance by security
type, based on when they have toroll things over and how the
Lord how much deficit they needto finance.
(27:19):
I guess a little dicey, orduring periods when you're a
budding, you know the deficit orthe debt is a budding, the the
legal limit and things have tochange a little bit.
But that's generally what Iexplained to you.
What they're doing here's whereI think they're completely off
base and this is more acombination of the civil
(27:40):
servants and the politicalpeople which is that they don't
really see the case for muchlonger debt issuance for the USA
, and I have dating back to thetime I was there.
So I've always thought that weshould start issuing maybe 100,
maybe even perpetual debt.
Perpetual debt doesn't meanit's outstanding forever.
The government could always buyit back at market prices.
(28:01):
But they're called consuls it'swhat the old British Empire
used to issue and the idea wouldbe to greatly lengthen the
average maturity of the US debt,which is right now about five
and a half years, which is notan unusual number by any stretch
, but I'd like to substantiallylengthen that to reduce our risk
profile.
(28:22):
And I totally understand andthis is the case that the debt
managers would make to me andthey'd talk to me slowly like
I'm an idiot and, ryan, you'veknown me for many years, so
maybe they're right, okay, butwhat they would say is listen,
bob, normally the yield curve isupwardly sloping, so if we
issue longer day-to-day onaverage, we're going to have to
pay more interest on average andour national debt will be a
(28:44):
little bit higher.
And my response was always doyou have term life insurance?
I mean, you're not going to beunhappy if you never collect on
that policy.
You're going to be really happybecause you're alive.
But what is term life?
You're not ripped off.
My term life whether it's, Idon't know, john Hancock or
whomever else has AIG.
I don't feel ripped off if thatterm life policy runs out.
(29:10):
That's the best case scenario.
Ryan (29:11):
Best case scenario it doesn policy runs out.
That's the best case scenario.
Best case scenario it doesn'tpay out Exactly.
Bob (29:14):
They aren't ripping me off, they're reducing risk.
So I'm willing to pay a premiumyou get that word premium each
and every year for a reductionin my family's risks, knowing
that chances are I'll nevercollect.
Well, I think taxpayers wouldbe willing to pay a premium
slightly higher average interestby year so that the debt
(29:35):
complex of the USA was much lessrisky, because if it's spread
out over hundreds of years,there's much less of a chance
that you'll run into a problemrefinancing the debt at any
particular point in time.
Ryan (29:50):
Okay, so here's a segue for you.
Speaking of revenue to thefederal government, let's talk
about taxes.
One of the biggest sources ofuncertainty today has to do with
tariff policies.
It seems like there's a lotgoing on there and maybe it's
(30:11):
difficult to interpret, becausemaybe they're being tariff
policies are being used as anegotiation tactic and the Trump
administration doesn't want toshow their hand.
But what's your opinion on whatthe Trump administration is
trying to accomplish with tariffpolicies and do you think
they're going to be successful?
Bob (30:29):
there's any one thing that Donald Trump has consistently
believed for the past 40 plusyears is that the US is hurt by
trade policy interaction withother country and that we need
more protectionism in the USA.
He has consistently it's theonly thing he has consistently
believed.
So I think that he believesthat tariffs would help the USA,
(30:52):
that it would help raiserevenue and it might do so
slightly and fix the tradebalance.
I think he's right on therevenue side, but on the trade
imbalance side, he's completelywrong.
We do not have a tradeimbalance because we're getting
messed with by other countriesand we cut too many free trade
deals.
We have a trade imbalancebecause the US is a fantastic
(31:16):
place to invest relative to therest of the world, and so people
around the world send us theircapital and because of that,
american companies and Americanconsumers can purchase more than
they produce.
So the question is is thissustainable?
Can they keep on sending us?
So the question is is thissustainable?
Can they keep on sending ustheir money?
I actually think it is, and thereason is because, even though
(31:37):
we are by far the world'sbiggest debtor, we owe the rest
of the world a heck of a lotmore than they owe us.
The interest we pay or thereturns we pay on their assets
here are minimal, very low,compared to the returns we make
on the investments we makeabroad.
So, even though we are the netdebtor, every year when you look
(32:02):
at the income flow, it comes inour direction.
It's as if you owed me $100,ryan, and I owed you $50.
You would be the net debtor,right.
But what if the deal on thehundred dollars I owe you is
that I have to pay you 10%interest per year and you have
to pay me 30% interest on the$50 you owe me?
(32:24):
I'm gonna debtor, but theincome flow is in my favor.
Every year You're peppy.
That's the situation the USA isin right now.
So we're the net debtor, but weon net make more off of that
exchange of assets and that, Ithink, is going to persist as
long as we're the world'sreserve currency and I expect
(32:44):
that to continue.
So as long as that persists, wecan have those flows to our
advantage, which means we cancontinue to run up debt that we
owe the rest of the world andthat means we can sustain these
big trade deficits.
If he raises tariffsconsistently, it's going to lead
to an appreciation of thedollar, and not every month
(33:07):
there, every week okay, butgenerally lead to an
appreciation of the dollar andthat appreciation will wipe out
the benefit he thinks therewould be from reducing the trade
deficit.
Ryan (33:19):
So do you think that the Trump administration just
doesn't understand the math thatyou just described for me?
Bob (33:26):
I think there are people in the Trump administration who
definitely understand it, butbeing a member of the
administration sometimesrequires a certain level of
telling the boss that he's agenius and, oh, he's right, and
people will just go along and dothat.
Ryan (33:43):
So you think the main purpose of the tariff policies
is to sort of rebalance thattrade imbalance as opposed to
other?
I guess what I'm getting withthis question is it seems like
it's somewhat linked with thebig beautiful tax bill that
Trump wants to pass, and I'mwondering if revenue from
(34:06):
tariffs would be counted whenthe CBOs I don't think that's
going to happen, ryan, andhere's why.
Bob (34:11):
If it's included in the bill, that means that you have
to take discretion away from thepresident, and he wants the
discretion to raise orpotentially lower tariffs
unilaterally.
He doesn't want his discretionlimited by Congress.
So that tariff revenue is notgoing to be part of the tax bill
(34:33):
.
I don't think I would besurprised by that, ryan.
So I don't think the increasedrevenue from tariffs is going to
be associated with that taxbill in a way that reduces the
net cost.
Ryan (34:47):
So feel free to dodge this question if you don't have an
opinion.
But I was recently in Canadafor work and everyone was
talking about the Trumppolicies-related tariffs on
Canadian goods.
And Mexico is another one thatthe Trump administration has
(35:09):
used tariffs as kind of puttingthem on, taking them off certain
categories.
It works, it doesn't.
Do you have any opinion?
What's going on there?
Bob (35:17):
I don't have a strong opinion or an opinion that I'm
very confident in.
One theory I have is that hisinteraction with Canada and
Mexico is designed to createchaos and a smokescreen, while
what he's really doing and drawattention away from the fact
that what he's really doing israising tariffs on China.
(35:39):
And so he'll talk about raisingtariffs on Canada and Mexico
and then back away.
Yeah, but he'll slap another10% on China that he doesn't
back away from.
So maybe he's creating adistraction politically.
Okay, but that's above my paygrade.
I don't know that.
That's just a theory.
Who?
Ryan (35:56):
am I to say?
A lot of people kind ofguessing at what the ultimate
objective is Now?
Bob (36:00):
do I think it's all about fentanyl?
I really doubt it.
I'm not saying it isn't, but Ilean against that.
You think there's?
Ryan (36:09):
something else happening, at least in addition to yeah?
Bob (36:13):
part of me thinks that like , yeah, they want to enact this
policy or talk about this policyvis-à-vis Canada.
And then when Kevin Hassett,the head of the National
Economic Council, is in the room, they go oh, kevin, this is not
an economic measure, we're justdoing this because of the
fentanyl.
And then he leaves the room andthey all laugh and they go oh
(36:34):
yeah, it's back to back totariff.
And then Kevin Hassett will goout in front of the cameras and
say, oh, it's really aboutfentanyl, and as far as he knows
it is, but he's not in the roomwhen they make the certain key
decisions.
Ryan (36:42):
I think Okay, so later this year there will have to be
a tax bill passed, because ifthere isn't a tax bill passed,
then individual tax rates willgo up next year.
Bob (36:52):
Correct, they'll go back to where they were in 2017.
Ryan (36:54):
So how do you think that this ends up playing out for
individuals and for corporationsCorporations?
If I'm not mistaken that taxrate of 21% is a permanent rate,
Correct?
Yes, but Trump has talked aboutnegotiating that as well.
So where do you think we land?
Bob (37:09):
So I think what's going to happen is we'll get a temporary
extension of the tax cut,originally in Athens 2017, which
itself was a temporary tax cut,not a permanent change in law
and I think the temporary natureof it will go maybe five, six,
seven years, and so we'll beback at it five, six or seven
years from now, talking aboutthis issue again.
(37:30):
I do think there'll be somechanges, though.
I think the corporate rate willprobably go down to 18 percent.
He talked about 15 percent onthe campaign trial.
I think that's a bridge too far.
There will be some sort of alimited tax relief for tips, but
that issue has to be writtenreally carefully because if they
don't, it's a massive loopholein the US tax code.
(37:51):
I think the state and local taxdeduction, which is near and
dear to the hearts of CaliforniaRepublicans and New York
Republicans and New JerseyRepublicans, who will have to be
included in voting for whatevertax credit extension happens,
because the Republican majorityin the House is so slender I
think that SALT deduction goesup, probably to somewhere in the
(38:12):
vicinity of $25,000.
It may even go higher, but togo higher, I think they would
have to pair it with a reductionor some limitation on the
corporate SALT deduction, whichback in 2017 they didn't do
anything about, which is alittle bit of a loophole Because
, ultimately, whether the stateand local tax deduction is taken
(38:34):
by individuals or companies, itinures the benefit of some
individual somewhere, whether anindividual taxpayer who earns
income or somebody who'sclipping dividends or getting
capital gains.
Ryan (38:47):
So that SALT deduction was once unlimited, correct?
Bob (38:50):
It used to be unlimited.
Yes, prior to 2017, essentiallyunlimited.
Ryan (38:54):
The reason that they can't make it unlimited again is
because the math all has to workin terms of making tax cuts
into the future somewhat revenueneutral.
Is that how it has to be?
Bob (39:06):
Well, it doesn't have to be revenue neutral.
I mean, they could in theorymake it unlimited again, but
that would massively increasethe cost, the scored cost, of
that tax cut.
Ryan (39:17):
OK.
Bob (39:18):
And there's only a certain amount of tax cut the
Republicans are willing to enactbased on optics, because,
remember, they have a slenderHouse majority and so the key
votes will come down to marginalmembers who are more moderate
than the fringe folks.
Key votes will come down tomarginal members who are more
moderate than the fringe folks,and so there's a certain optical
level that some members in theHouse and Senate might be
(39:39):
uncomfortable with AliciaMurkowski, susan Collins, tom
Tillis, whomever and so theyhave to have a number that they
agree with.
And the more they use to uncapor raise that SALT deduction,
and the more they use to uncapor raise that SALT deduction,
that's tax relief that can't beapplied for other reasons, like
marginal tax rates or tax relieffor tips or for some other form
(40:02):
of tax relief.
So I think, or the corporatecut down to 18, or maybe getting
it to 15 percent if Trump hashis way.
So I think that there arelimits.
The other thing is that,distributionally, once you get
above that, once you get above10,000, in fact, once you start
at zero or any soft deduction,you're really helping upscale
(40:24):
people.
And just so that the peopleknow at home, ryan, you are
hailing from the state of NewYork, which is a high-tax state.
It is very high-tax.
I come from a moderate-taxstate, the state of Virginia tax
state.
I come from a moderate taxstate, the state of Virginia.
So I would prefer to keepthings the way they are or maybe
reduce the state and local taxdeduction.
Ryan (40:40):
You obviously I say unlimited.
Bob (40:42):
Yeah, of course you say unlimited.
Ryan (40:44):
That's purely selfish reasons.
Bob (40:46):
Not ideological at all.
If I lived in New York, I wouldbe saying the same damn thing.
Ryan (40:53):
So why do you think five to seven years would be the
extent?
Is there an incentive from apolitical standpoint to want
those tax rates to expire?
Because then it gives you anissue to run on.
Bob (41:06):
I don't think it's that, although that's true, it's
described in Washington DC tosome extent as a milker.
What?
Is a milker.
Ryan (41:15):
A milker is like something's included in a DC to
some extent as a milker, okay.
Bob (41:16):
What is a milker?
A milker is like something'sincluded in a tax bill.
It usually refers to somethingthat's something minor that has
to be renewed every year or two.
Okay, like the R&D tax creditor something like that.
It's a milker, which is thatthe lobbyists are totally fine
with lobbying for a one ortwo-year extension, because then
(41:39):
their client is going to haveto keep them on retainer.
To come back to the Ways andMeans Committee and the Senate
Finance Committee and beg thosemembers to keep it going Was
that a part of any of yourcourses at Georgetown Is that
like?
you know, Milker 201 orsomething like that no.
Ryan, it's taught on the meanstreets of Washington DC and it
also from the members'perspective.
It's great because it means thelobbyist is going to have to
(42:00):
keep donating to your campaigns.
Right, because if you're in theHouse, especially on the Ways
and Means Committee, you'rerunning every two years.
So there's no better way tomilk the process overall than to
do this.
Now I'm using milker in aslightly different way, which is
to say that the RepublicanParty by doing this temporarily,
they can scare the daylightsout of people five, six, seven
(42:25):
years from now by saying hey, ifyou don't vote for us, the
Democrats are going to raisetaxes across the board,
including on you, so you bettercome out and vote for us.
Ryan (42:34):
So it's a milker in a slightly different sense okay,
but you don't think that that'sthe main reason why it's temper,
or do you know?
Bob (42:40):
I think the main reason is that they don't.
In order to make it permanent,it has to be fully offset with,
with, with spending cuts andthat are enacted in law, not
just doge going through theagencies, not just future
president, president's,eliminating workforce, riffing
(43:03):
workforce and stuff like that.
It has to be legislated, and sounless you're doing stuff on
entitlements, not SocialSecurity, social Security
campaign included, which, whichare tough votes for Medicare,
medicaid, things like that, orraising other taxes to offset it
, you can't make it permanent,and so you're better off just
doing it temporary and hoping tosignal to businesses and
(43:26):
consumers hey, we're going tokeep this going.
It's just going to take alittle bit of work legislatively
, but trust us, we're going tobe there for you.
Ryan (43:34):
The corporate tax rates were permanent.
That were cut back in the firstTrump administration.
How is that different?
Bob (43:42):
Because that portion was fully offset.
Oh okay, they can only offsetI'm using two opposing words
they can only fully offset partof it.
Oh okay, and so that was-.
That segment that segment waswas done separately.
Ryan (43:58):
Okay to make it permanent and in order to you mentioned
18% as a number that maybe thecorporate tax rate got to know
it came down to 21, no, no, butso in the future?
Under negotiation you saidmaybe they'd bring it down.
He talked about 15, they'dbring it to 18.
Would that have to be fullyoffset as well?
Bob (44:18):
If they want to make it permanent.
Yes, my guess is that's aportion they might make
temporary, so they don't have tocome up with.
Ryan (44:28):
See, now that brings me back to the Milker theory, if
that's what we're going to callit.
Bob (44:32):
I mean, you can't out-cyic me about Washington DC, ryan,
but Staying at 21%.
Ryan (44:37):
If I'm a business, I like the certainty of 21%.
Bob (44:40):
If it's permanent.
Ryan (44:41):
Because then someone has to actually go in and raise
taxes If I'm a business.
Bob (44:46):
I would be more than happy to accept 18% for some period of
time yeah, that's unknowablesome unknowable period of time.
If the most it would go back toonce it were no longer 18,
would be 21.
Ryan (45:01):
Oh, okay, that's a good point so you've out-Washingtoned
me again, bob.
This is why we the deepinsights from a former deep
state operative.
Okay, well, I'm looking at theclock.
Here I have about two hoursmore worth of questions for you
that we're not going to get totoday.
(45:21):
Why so little?
We can't?
You mentioned the Rogan methodof trying to tire the guest out
until they start to crack andgive you their true opinions.
We're not going to have achance to do that today, but I
do thank you for joining us onthis episode and we'll have you
back on real soon.
Bob (45:38):
Delighted to be on Looking forward to the next time All
right.
Ryan (45:40):
Thanks, bob, and thank you to all of you for joining us on
this episode of the First TrustROI Podcast.
We'll see you next time.
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