December 22, 2025 • 47 mins
At the precipice of a new year, Bob Stein discusses the implications of a probable new Fed Chair, the possibility of a Supreme Court ruling against tariff policies, and the odds for mid-term elections.
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Episode Transcript
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Ryan (00:08):
Believe it or not, 2025 is almost in the books.
As we look forward to 2026, wehave midterm elections on the
horizon.
We've got a Fed that's probablygoing to reduce interest rates,
but we will see.
And we wonder what theimplications of all of those
things will be on the U.S.
economy.
Joining me today on the FirstTrust ROI podcast is Bob Stein,
(00:31):
Deputy Chief Economist at FirstTrust.
Thanks for joining us.
This is the final episode of2025.
I feel like the whole year hasbeen building to this episode of
the ROI podcast.
Bob (00:46):
I think that's the correct characterization, Ryan.
Ryan (00:49):
So we're very excited.
Welcome.
Thank you for uh for being apart of this final episode of
the year.
And uh, you know, all theviewers of the podcast, Merry
Christmas.
It's gonna air just beforeChristmas.
Merry Christmas to you as well.
Thank you, Ryan.
Happy Hanukkah to you.
All right.
Very good.
Um so the year has kind offlown by.
(01:10):
Is that uh is that true?
Oh, it definitely has.
It's it's been a meaningful,eventful year, but um it has, I
mean, all of a sudden I blinkand we're at the end of the
year.
Um and looking at next year,it's gonna go just as quickly,
but there are midterm electionson the horizon.
And you know, we don't have tocover the uh at the outset of
(01:32):
our conversation.
We can go into other topicsfirst.
But uh any uh any thoughts orfeelings on generally how those
are gonna go?
Bob (01:40):
Yeah, I think the House elections are gonna go well with
the for the Democrats, and theSenate elections will go just
well enough for the Republicanswhere they keep control of the
Senate.
So um I'll let each individualviewer decide for themselves
whether that's good or bad.
Um but there will never be adull moment with Trump in
(02:01):
office.
I think there's going to be anew precedent set this year uh
when the Republicans have kindof a mid-cycle, if you will, um
convention.
Usually the politicalconventions are only every four
years.
But I think Trump will want todraw attention to the Republican
Party mid-cycle, and I thinkthey're planning on something
(02:23):
probably in Nevada this summer.
Um I believe it's Las Vegas,um, to try to highlight what he
believes the accomplishments ofthe Republicans have been so
far.
Ryan (02:35):
Is there another city in Nevada where they would have a
convention besides Las Vegas?
Well, I mean potentially Reno.
Don't diss on Reno, Ryan.
I didn't mean to, but um itjust seems like I love Reno.
There are a lot of conventionsand a lot of space for
conventions in Las Vegas.
Absolutely.
And you know, I'm I'm sure youwould be averse going to uh Las
Vegas because that whole youknow gambling thing is not your
(02:58):
That would be horrible.
That would be terrible for you.
Okay, so before we dive intotoo much detail of what's coming
ahead, I want toretrospectively get your take on
kind of where we've therethere's a lot of talk early in
the year on what would happen inthe first year of the Trump
presidency.
And I think probably some didand some didn't, but that's my
(03:21):
question for you.
Were there any reallymeaningful changes to policy
that you saw implemented thisyear?
Um I know there's a big taxbill, so maybe maybe that's it.
But um anything that you thinkwas, you know, a really
important thing as we lookforward?
So it's kind of interesting.
Bob (03:39):
Uh uh I was taken by surprise at the speed with which
President Trump was able to gethis um one big, beautiful bill,
as he called it, passed.
And I guess as it was ended upbeing officially called.
Um however, in terms of thepolicy direction, it's not that
much different from what anybodycould have anticipated um when
(04:00):
he was elected, at least on taxpolicy.
Um what was not anticipated,and what the president has been
very aggressive about is takingas much control, seizing as much
control, many people would say,um, of the executive branch as
any president has in multiplegenerations, and trying to put
(04:23):
his stamp on policy making fromthe from the bottom up.
And he did that in the veryfirst days by basically shutting
down uh USAID by going afterthe Department of Education,
shrinking um small businessloans, um as well as uh you know
(04:45):
during the federal shutdown,threatening to fire certain
government workers, and what inwhat he described publicly as
kind of uh uh left-wing, what hedescribed, I want to emphasize
that as like left-wing codedagencies where the federal
workers are almost all opposedto his agenda and almost all
(05:06):
politically hostile to him, atleast by his perception.
Um it's kind of interesting.
If you look at total federalspending, fiscal year that ended
in Sept on September 30th,right before the shutdown, um i
i i i if you look atdiscretionary spending at least,
it was down from discretionaryspending the previous year.
I mean, there's certain thingsthat a president cannot affect
(05:28):
in the short term.
Ryan (05:29):
Is it down in absolute spending or down beyond, down
below what was budgetedspending?
Bob (05:33):
No, no, no.
So if you look at if you takeout I'll be precise in my
language here.
If you take out the things thata president cannot immediately
directly affect entitlement,Social Security, Medicare,
Medicaid, net interest on thenational debt, which is
basically early on baked in thecake based on previous policies
(05:54):
from previous presidents.
What you're left with isdiscretionary spending, which
has to be annually appropriated.
Well, the amount ofdiscretionary spending in fiscal
year 2025 looks like it waslower in absolute dollar terms
than it was in the previousfiscal year, the last full
fiscal year under PresidentBiden.
(06:14):
And that doesn't happen veryfrequently, at least at this
stage of a business cycle, whereyou're deep in the business
cycle, you're not adjustingthings based that much on COVID
or anything like that, to havean outright dollar reduction in
the amount of spending.
And so because of that, thefederal budget deficit, which
was I think 6.3 percent of GDPin the prior fiscal year, the
(06:37):
last full fiscal year underBiden, came in at 5.9 percent of
GDP in the fiscal year thatjust ended.
Now, that's still way too high,totally unsustainable, but it
is lower than it was theprevious year.
And so a lot of people aretalking about all this um all
the fiscal measures taken tostimulate the economy, but when
you look at the overall budgetdeficit, we've gone from
(06:58):
expansionary to contractionaryvery quickly.
And so um I think there isstill an outside chance of
feeling a little bit of thatburden in the short run in the
coming calendar year in terms ofeconomic growth.
I do not expect um a recessionnext year.
I think it's possible, but letmuch less likely than 50 percent
(07:22):
at this point.
But I also feel as if there'snot going to be an overall
economic boom.
I do not see consistent threepercent plus real GDP growth,
much less four percent, likesome uh wild-eyed optimists
might say.
I I think two to two and a halfpercent economic growth, kind
of pedestrian over the nextyear.
Ryan (07:43):
Over the next year.
Do you have any uh earlythoughts on how we're gonna end
up Q4?
Q4?
Bob (07:49):
Well, Q3 isn't even out yet.
So let's talk about that for asecond.
I think Q3 will end up comingin somewhere in the vicinity of
three percent economic growth.
Okay.
Solid quarter.
I think Q4 will come insomewhere in the vicinity of one
and a half percent economicgrowth.
Um I think that there may be alittle temporary weakness
(08:10):
related to the governmentshutdown.
Not that the governmentshutdown is going to cause a
recession.
We should never be concernedabout that.
But it will temporarily slowreal GDP growth or measured GDP
growth, if you will, the way thegovernment accountants keep
track of that.
Um and but remember, thatnumber won't be out until the
(08:30):
earliest late January.
Ryan (08:31):
So I noticed one of the things that you didn't mention,
and maybe because it was umexpected, um it was tariff
policies.
You talked about uh you knowsome of the other policy impacts
and USAID getting cut and someother spending cuts, but um it
seems like tariffs had certainlya big impact on markets, um,
probably on some decisionmaking.
(08:53):
Um do you have any sense ofwhere the future lies,
especially as we head intoanother election year?
And you know, it's not thatmuch longer before uh a
potentially a new party takespower, and if these are, you
know, just uh non-legislatedtariffs, it seems like it'd be
easy to reverse.
So uh what's your what's yourview?
Bob (09:13):
Okay, I think I've said this previously on your program,
Ryan, that I'm a I'm a trainedeconomist, and so I'm gonna take
professional privilege andspeak out of both sides of my
mouth.
Okay?
So bear with me for a second.
Beautiful.
Okay, number one, um I thinktariff policy has been roughly
on par in Trump's first yearwith what any reasonable person
(09:35):
should have been anticipatinghad he won the election, which
he obviously did.
So I don't think there'sanything crazy there about what
he's done so far in terms ofwhat was expected once he got
elected.
Um in terms of like the biggestthing investors should be
focusing on right now, it's thecase that was heard before the
Supreme Court over the lastcouple of months about whether
(09:56):
much, not all, but much of theTrump tariff regime um will
remain in place legally.
And I think the Supreme Courtearly next year is gonna come
out with a ruling striking downmuch of those Trump tariffs.
Not all of them, but I thinkthe 10 percent global tariff, as
well as certain individual uhtariff extra tariffs on certain
(10:18):
countries are gonna be struckdown because he used um this is
what the Supreme Court is gonnasay.
Okay, and I could be wrongabout this, but this is my base
case for what they're gonna sayearly next year.
They're gonna say he exceededthat not that they're
unconstitutional, but that thetariffs exceeded the statutory
mandate of the law that Trumpwas using.
(10:40):
Um emergency powers.
He will, I think, respond tothat case by imposing similar,
not completely the same, butsimilar tariffs based on other
legal authorities, otherstatutes that Congress has
passed, that gives the Presidentthe authority to impose tariffs
based on unfair trade practicesas well as uh running trade
(11:06):
imbalances with those specificcountries.
So he'll he'll have a chance toresuscitate, if you will, these
tariffs.
The other big issue, and thisgoes to fiscal policy, and I'm
gonna go out on a limb, becausethe prediction markets say I'm
gonna be wrong about this, butI'm gonna go out on a limb
anyhow.
I I think the predictionmarkets are wrong about this, is
that the prediction markets saythat not only is the Supreme
(11:28):
Court gonna strike down a lot ofthose tariffs, they're gonna
make the Treasury Departmentrepay the tariffs that have been
collected already.
Okay?
The ones that they strike down.
If there's money collectedbased on that, that's gonna be
like well more than $100billion.
Okay.
I don't think the f I don'tthink the Supreme Court goes
that far.
I think what they're gonna sayis we're gonna strike down these
(11:49):
tariffs, but we don't but butthe government, the Treasury
Department, does not have torepay the ones that have been
collected already.
And the reason I believe istwofold.
Number one, um, I think theidea of issuing an order
requiring the TreasuryDepartment to issue checks
totaling more than $100 billion,which would be unprecedented in
(12:13):
U.S.
history.
I mean, they've struck down alot of laws, but not a fiscal
law like this or a fiscalregulation like this.
I think it it it would makeSupreme Court Justice John
Roberts like like like he mightpuke before he says it.
Like I it's just it's somethingthat it it seems well out of
(12:33):
bounds for what he the role thathe envisions for the Supreme
Court as part of the federalgovernment to issue an order
requiring the TreasuryDepartment to regurgitate more
than $100 billion.
I just think Okay.
And I think the justification,the legal justification will be
that, yes, we know exactly whowrote these checks to the
Treasury Department in the firstplace.
(12:54):
So in theory, we could justsend that money back.
But just because you wrote thecheck to the government doesn't
mean you felt the actual burdenof the tariff.
So, you know, the the analogywill be you know, if if if uh if
a if a city slaps a sales taxon steak, um the owner of the
(13:15):
restaurant cuts the check toChicago or New York City or
wherever, right?
It's the owner of therestaurant.
You don't buy a steak and thenas the patron pay the
government, the the steakhousepays the government, right?
But ultimately the burden isfelt not by the steakhouse, but
by the person who bought thestake, right?
So um I think the Supreme Courtwill say, yes, you know, we
(13:37):
have the list of entities thathave paid this tax, but if we
order a refund, the entitiesthat paid the tax are gonna have
a windfall gain.
You know, if the city refundsthe the to the stakehouse owners
the sales tax on those stakesbecause they find it was illegal
or something to impose that taxin the first place, the guy who
bought the stake ain't gettingthat refund, right?
(13:58):
It's a windfall gain for thestakehouse owners.
Okay, I think that's theSupreme Court's reasoning.
They're gonna say we don't haveto order the refund because
it's not gonna get to the indivthe entities that actually felt
the burden of the tariff itself.
And so they're gonna strikethem down.
Uh Trump, over the ensuingcouple of months, will reimpose
similar, not completely thesame, similar tariffs using
(14:20):
separate powers.
Ryan (14:22):
So do you think the Trump administration will follow
through with their I don't knowif it's a promise or or what,
but they said that they weregonna send out checks to
taxpayers, something like $2,000in checks coming from tariff
revenue.
Trevor Burrus, Jr.
Bob (14:38):
I don't see how they can do that without passing another
tax bill, and as well without uhwhich would have to go through
the reconciliation processbecause they're probably not
gonna get enough Democraticvotes in order to do that.
And so I think it's gonna betough for them to do that.
I don't think I don't see thathappening.
(14:58):
I see the President talkingabout it but it not getting
done, because every dollar theysend out will be a dollar added
to the deficit.
Ryan (15:06):
Right.
Bob (15:06):
Which brings up another question.
Because, like, what's the pointof imposing the tariffs if
you're then just gonna stimulatedemand, much of it, which will
go to uh going to purchaseimported products?
It just doesn't make a lot ofsense.
So uh m my best guess is thatthose extra checks are not gonna
(15:27):
go out.
Some Republicans want to do itsimply because it's an election
year, frankly.
Let's be blunt about it.
Um the other problem that I seeum uh for getting rid of these
tariffs or offsetting the costsis let's say the next president
is Gavin Newsom.
And no promises here.
Okay, I'm just making somethingup.
Let's say the next president isGavin Newsome.
(15:49):
Um he takes over in uh inJanuary 2029.
And let's say, even though hewins and the Democrats control
the House of Representatives,that the Republicans still have
a narrow majority in the U.S.
Senate, which is entirelypossible.
If they do, then Gavin Newsomedoesn't get to pass an income
tax increase.
(16:10):
And so if he simply issuesexecutive orders reversing the
tariff tariffs imposed by theTrump administration, he's gonna
blow a massive hole in theFederal deficit, right?
So um I think a futureDemocratic administration,
unless they sweep, unless theyhave the House and Senate, will
(16:32):
be politically penned in toaccept many of the Trump tariffs
or something similar to themover the course of the next
several years.
Again, even if tr even if theRepublicans don't win the next
election cycle.
Ryan (16:45):
Okay.
Um shifting gears a little bit.
The Fed is going to appoint,most likely appoint, a new chair
in, I believe, May.
Um what is your what's yourtake?
Who's is it going to be theodds-on favorite or is it going
to be some dark horse?
Bob (17:05):
Um so the odds-on favorite is now NEC head Kevin Hassett.
Um I've worked with KevinHassett in the past, or maybe
not worked, right, but we'veinteracted in the past in
Washington, D.C., back when Iwas with the Treasury Department
and perhaps before.
Kevin is a brilliant guy.
He would be an effective Fedchairman.
He he knows the job, he knowswhat to do.
(17:28):
Um he could um he could takethe staff recommendations with a
grain of salt.
He knows monetary policy betterthan Jerome Powell.
Um but I think he would also beperceived not correctly, but
perceived by many in theinvestment community as kind of
um a proxy for the Trumpadministration at the Fed.
(17:51):
And so if he were nominated,and he is the favorite, both the
prediction markets say that,and I believe it, okay, at this
point.
Um I I think I think you mightsee a little bit of a run-up in
the tenure, um, in the tenureyield.
I don't think that's a bigproblem.
I think he would do his jobwell.
(18:12):
Um the the the dark horse atthis point is Kevin Warsh.
If you look at the predictionmarkets, he has something like a
12 percent chance of being thethe next Fed chair.
I think his odds aresignificantly higher than 12
percent.
I think they're more like 30percent or so.
Okay.
I I think um he would also bean very effective Fed chairman.
(18:34):
He would not be perceived bythe financial markets as as much
of a proxy for the Trumpadministration or um um or
associated with the Trumpadministration as Kevin Hassett.
And um I'm probably a littlemore telegenic, not as much of a
monetary expert as I thinkKevin Hassett would be, but
(18:57):
knows financial marketsextraordinarily well.
So uh both of them would bevery good Fed chairmen.
Ryan (19:04):
So the Fed chair kind of gets the credit or the blame for
setting monetary policy, forraising and lowering interest
rates, but there's a committeethere, right?
And and so how much whoever thenext chair is let's say they're
perceived to be more favorableto the Trump administration and
(19:24):
more dovish than they should be.
Do they get to make thedecisions or do they need to
actually move the committee andand how does that work?
Bob (19:30):
That's actually quite interesting, Ryan, because
there's a little bit of intriguehere.
Okay, and I hate to get deep inthe weeds and how the Fed
operates.
So monetary policy is not madeby the Fed Board of Governors
itself, it's made by the FederalOpen Market Committee, Federal
Open the FOMC.
The FOMC consists of all theseven governors, plus a rotating
(19:52):
group of uh Federal Reserve,regional Federal Reserve Bank
presidents.
Always includes the New YorkBank President and several
others.
I forget who's on it this year,but you know, it it it's bigger
than just the governors.
Um theoretically, the majorityon the board of governors, and
(20:14):
once Trump appoints and has thatperson confirmed as the new
chairman, he will have a four tothree majority.
The majority of the board ofgovernors itself, that's seven,
they can they can fire bankpresidents.
Now, legally, it says uh theyhave to have cause.
Okay, that's why, for example,um President Trump, who wanted
(20:37):
Federal Reserve Governor LisaCook fired, couldn't yet,
because she's arguing in court.
There's no cause here.
Um he hasn't proven it, and souh uh you can't fire me yet, and
that's going throughlitigation.
Um and probably won't bedecided for quite some time.
Um but what if there's a 4-3majority on the board itself?
(20:58):
Not the president, the boarditself saying, no, we want this
person fired.
That's a little bit more of agray area than the president
trying to remove a specificmember of the board of
governors, who the presidenthimself theoretically is in
charge of appointing.
That was a biting appointee,but some president was in charge
of appointing.
So there's a little bit of agray area here.
(21:20):
Um I'm not sure how the courtswould come out, but in theory,
the four-three majority on theboard of governors that Trump
will have starting in May couldrun roughshod over the bank
presidents and say, oh, you'renot gonna play ball.
Well, we're gonna remove you.
And so you better play ball.
And so some of them areprobably ideologically inclined
to play ball and vote with thechairman anyhow.
(21:42):
But if they aren't, they mightrun into trouble.
Um and we'll see, we might seethat go to the court system, the
federal court system, and thecourts will might have to get
involved in telling the board ofgovernors no at a Federal
Reserve meeting, you're gonnahave to count this bank
president's vote, even thoughyou didn't let them park at the
Fed that day and didn't let theminto the building.
(22:03):
Like, you know, you littleminutiae like that.
Ryan (22:05):
Yeah.
Bob (22:05):
I mean, in theory, uh they could do that.
Um, so so um uh uh bottom lineis that a 4-3, a board of
governors majority has morepower than a simple 4-3 vote.
Ryan (22:20):
Has there ever been any uh sort of rebellion like that?
Bob (22:26):
So there were there have been stories about, you know,
the the I think it was in themid-1980s when some of the
members of the Board ofGovernors and I don't want to
name name names because I'veforgotten this.
This is like I I knew thisstory better 30 years ago, back
(22:46):
in the 90s.
So um uh in the mid-1980s,where there was more pressure um
coming from individual membersof the Board of Governors on the
chairman to shift monetarypolicy this way or that.
Not in the past 30 years,though.
That really hasn't happened.
Ryan (23:05):
Okay, so let's uh I want to get your more granular views
on the midterms.
Um in terms of, you know, let'sfirst talk about the House and
then the Senate.
You you mentioned that youthink that the Democrats are
maybe a better than 50 percentchance to take the House?
Bob (23:23):
Well better than 50 percent.
Well better than 50 percent.
So um let's put it this way.
Uh historically speaking, theoutparty, and I define out party
by the party not occupying theWhite House, like this cycle
would be the Democrats, but insome cycles uh it's the
Republicans.
Okay, the outparty tends to doextremely well in midterm
(23:45):
cycles.
Um not always.
Sometimes they lose seats, likein 1998 and 2002, unique
situations with the MonicaLewinsky-related impeachment in
98, and in 2002, right after9-11.
Well, not right after, or ayear after in the shadow of
9-11.
So it doesn't always happenthis way, but the Out Party
(24:05):
tends to win seats, um,sometimes substantially.
The Republicans were only aheadafter the end of the last
cycle, 2024, 220 to 215.
So all the Democrats have to dois go plus three in the House,
plus just plus three, andthey're gonna win.
Okay.
That's all they have to do,plus three, then Hakeem Jeffries
(24:25):
becomes Speaker of the House.
Um you look at the results ofthe elections last year, and in
the national House vote, theRepublicans won by 2.7
percentage points.
Okay.
2.7 nationwide in the Housevote.
Um right now the polls show theDemocrats ahead by five points.
(24:50):
And I give them an additionalhalf point because I think the
Democrats will probablyoutperform the polls.
The nature of the Republicancoalition has changed.
They turn out more intensivelythan anticipated in presidential
cycles, less so for specialelections and midterm cycles.
Okay.
So if you go from plus 2.7 tominus 5, and then another half
(25:11):
point, because that's a that's aturnaround of about 8
percentage points, so slightlymore than 8 percentage points in
the popular vote.
So what does 8 percentagepoints look like in terms of the
number of seats?
Okay, I can go into moregranular explanations here, but
I estimate 8 percentage pointsof the popular vote for the
(25:32):
House is worth about 24 seats,three seats per percentage
point.
And so if we were using themaps from 2024, which we're not
completely, the district mapsfrom 2024, I would expect that
if the polls stay where theyare, or the polls are where they
(25:52):
are today, um, 11 months fromnow, that the Republicans will
pick will win 24 fewer seatsthan they won last time.
That'll take them down to 196.
Okay?
So um you need 218 to have amajority, and Republicans are
short.
Now the Republicans have an aceup their sleeves, and they've
been playing it, but so are theDemocrats.
Uh you know, so the Republicansstarted redistricting in
(26:15):
certain states like Texas,they're talking about it in
maybe Indiana, maybe Florida,elsewhere.
Um, but the Democrats have acesup their sleeve, they're
playing that card in California.
They're probably going to playthat card in my home state of
Virginia.
There might be other states aswell.
So, net net of all this, theRepublicans should pick up a few
seats.
But picking up a few seats from196 still doesn't get you to
(26:40):
218.
Maybe it gets you to 200.
Ryan (26:42):
Okay.
Bob (26:43):
But there's another thing going on.
And this is something that Ihave trouble quantifying, which
is that it is possible thatearly next year, at least by
June, but possibly early nextyear, the Supreme Court may have
reinterpreted the Voting RightsAct to give certain Southern
(27:05):
states, Southeast United Statesin particular, more leeway in
how they draw the districtlines.
And if they allow those statesmore flexibility in where they
draw the district lines, thatcould add to a much larger
bonanza for the Republicans interms of the number of seats.
Now, I have a lot of trouble.
It's a very ambiguoussituation.
(27:26):
I can't statistically tell youwhat are the odds of the Supreme
Court making this decision inthe Republicans' favor, what are
the odds of them doing it earlyenough, and what are the odds
of each of these states actingon this greater leeway before
the 2026 election cycle uh um isthrough.
Okay, uh that's too muchambiguity.
(27:47):
Um I'm not an expert on that.
I don't think anybody's anexpert on that, because it's a
one-time scenario.
Yeah.
Okay, you can't model that.
Um so I'm assuming they pick upmaybe five more from that as
well.
So my best guess right now, interms of the number of seats
that the Republicans are goingto win, um would be something
like 206.
If you hold a gun to my headtoday, 206.
(28:10):
Okay, because I'm assuming thatboth the Voting Rights Act case
and the other redistricting,non-ro not related to the voting
rights act case, adds a totalof 10.
But it could end up being 25.
Like if if all the VotingRights Act redistricting goes
totally the Republicans' way.
So, net of all this, I thinkthe Democrats have about an 80
(28:32):
percent chance of taking backthe House.
The one thing I know for sureis that number is liable to
change significantly in thefirst half of next year as we
see what the states do and whatwe see uh how we see the Supreme
Court um reacting to the casethat was heard last year.
Ryan (28:50):
So you just said that this could happen early in the year
next year, but as late as June.
So do you mean to say that thelines for the congressional
districts could be changing?
So if I live somewhere, the uhrace that I'm actually voting in
could change as late as well.
Bob (29:08):
Well, you live in upstate New York.
So that's not going to be aVoting Rights Act state.
Right.
But it could happen in some ofthose states.
It also depends on what statelaw says about when they have to
finalize their district lines.
And I I am not an expert on astate-by-state basis of what
those say.
Yeah.
Um so it's such an ambiguousone-off situation that I'm I'm
(29:32):
reluctant to completely committo how many seats the
Republicans are going to gain.
It could be zero in this cycle,and then maybe fifteen or
twenty in the following cycle in2028.
Um but it could end up being abonanza in this cycle, and I
don't think um it should bewritten off completely.
Okay.
A lot of variants there.
Ryan (29:52):
Trevor Burrus, Jr.
So you said that the Democratsare likely to take the House,
but the Senate is likely to staywith the Republicans.
Of course, Senators only go upfor election once every six
years, right?
So the every third cycle.
Yeah.
So is that why the differenceexists in this cycle?
Bob (30:09):
Uh in part, yes.
Okay.
But it's also like which statewhich states are up for election
in this particular cycle.
Yeah.
So there are a lot moreRepublicans that have to defend
their seats than Democrats inthis cycle in 2026.
So superficially, if you hearthat, you're thinking, oh,
there's a lot more downside riskfor the Republicans than the
Democrats.
(30:29):
They can easily lose the three,um, or actually four, so that
the Democrats would takecontrol.
Right now, the Republicans have53 seats in the U.S.
Senate.
If it's 50-50, if they onlylose three, J.D.
Vance breaks ties, right?
Right.
So assuming nobody dies in theinterim, J.D.
Vance breaks the ties, theRepublicans would still would
still have nominal control.
(30:49):
And so the Democrats have togain four to take control.
I don't think they're going togain four.
Because even though the de theRepublicans have to defend more
seats, of the 22 seats they haveto defend, 20 of them are in
what I would describe as red orRepublican states.
States that are highly likelyto go for a Republican in a
(31:10):
presidential cycle.
And if you look backhistorically, there are wave
elections that include theSenate, big swings and Senate
races.
They usually occur in midtermswithin the purple states.
Not always, okay, but generallywithin per whatever the purple
states were at the time.
Okay, and what what is a purplestate has changed over time,
(31:33):
which are red, which WestVirginia used to be a blue
state, now it's a red state, uh,et cetera.
But it's usually the thegenerally centrist states where
uh if it's a Republican wave,then like you'd see a lot of
losses among Democrats in purplestates.
And if it's a Democratic wave,you'll see a lot of losses by
(31:54):
Republicans running forre-election in purple states.
It wouldn't really affect theblue and the red states that
much.
So of the 22 seats that are upfor grabs that the Republicans
have to defend, 20 of them arein red Republican states.
And I think probably at most,um the Democrats will gain one
(32:14):
of them.
Unnet.
One of them.
Okay, just uh maybe zero, evenif they have a good year.
So they're gonna train most oftheir fire on two states, the
Democrats will, Maine and NorthCarolina.
Um in North Carolina, I thinkthey're gonna win.
Tom Tillis, the incumbentRepublican, decided not to run
for re-election.
That's good for the Democrats.
And number two, it looks likeRoy Cooper, the former governor
(32:38):
of the state, popular two-termgovernor, is gonna run for
re-election.
He has a relatively moderateimage, and because of that, I
think he probably wins.
So that's a pickup for theDemocrats.
Um Maine is also a statethey'll target.
Uh that has a Republicansenator.
It's a purple state.
Susan Collins, however, isrunning for re-election, and she
(33:00):
has a proven track record ofwinning, even in years that are
hostile to the Republican Partyin general.
So, for example, she won thatseat back in 2008.
John McCain was getting thefloor wiped with him by Barack
Obama by seven and a half, sevenor eight percentage points,
national popular vote.
Susan Collins wins easily inthe state of Maine.
2020 rolls around.
(33:21):
That was the last time she wasup for re-election.
Um, Joe Biden beats DonaldTrump by four and a half points
in the in the national popularvote.
Susan Collins was behind inevery single statewide poll in
the state of Maine in Octoberand early November, every single
one.
She ended up winning easilythat year.
So I think in the end, she'llwin.
(33:42):
Democrats have some problems oftheir own.
John Ossoff, state of Georgia,not particularly popular.
If they're if the Republicanshave enough common sense to
nominate a non-mega Republican,in the state of Georgia, they
have a fighting chance.
Minnesota, Tina Smith, um uhMichigan, Gary Peters, and Gene
Shaheen and New Hampshire allretiring for the Democrats.
(34:06):
So those would those would bestates where the Democrats would
win if they had the incumbents,but because they're retiring,
Republicans have a fightingchance.
I think of those three, theRepublicans probably have their
best chance in Michigan.
Um I'd give the Democrats aslight edge, but only slightly.
Uh whether or not they keepthat state may hinge on who they
nominate.
If they nominate somebody who'sum uh strongly supported by
(34:30):
Dearborn, Michigan, they'llprobably lose.
Okay.
If they nominate somebodyoutside of Dearborn, um I give
them a slight edge.
So I I think that in the end,uh net net, Republicans today
are 53, they probably lose oneon net and end up with 52 seats
in the U.S.
Senate.
So lose the House, um, keep theSenate, but lose uh on net a
(34:54):
seat in the Senate.
Ryan (34:55):
Okay, so let's say things play out in the midterm
elections, kind of as yourexpectations um say, and we've
got a Republican uh Senate,Democrat uh House, and of course
Donald Trump in the presidency.
What are the implications forpolicy kind of going forward for
(35:15):
the last two years of the Trumpadministration?
Bob (35:17):
Okay, so if I'm right, then Donald Trump has four years to
be our foreign foreign policypresident, including on the
issue of tariffs to some extent.
Um he's got four years toappoint people to the federal
courts, including should therebe a vacancy to the Supreme
Court.
He's got four years to runroughshod over the executive
agencies and departments andhire and fire whomever he darn
(35:38):
well pleases, because theSupreme Court looks like it's
ready after the hearing today togive the president um
additional powers to hire andfire and overturn something that
the a court case from 90 yearsago called Humphrey's Executor
that was came out during the uhFDR administration.
Um so he's gonna have all thosepowers, but he's only got two
(36:00):
years to legislate, and thefirst year is almost done.
So starting in in my belief mybelief is that starting in
January 2027, every piece oflegislation that gets to his
desk is gonna have to be atleast a little bit bipartisan to
get there.
So what does that mean?
They're gonna pass theappropriations bills in the last
if I'm right about the outcomeof the election, they'll pass
the appropriations bills, andthen Trump is gonna push his
(36:24):
executive power to the hilt andrefuse to spend all the money on
the priorities the Democratsnegotiate up on Capitol Hill,
which is gonna make thenegotiation process even
tougher, right?
Because the Republicans onCapitol Hill will say, Oh, we'll
compromise with you, Democrats,and they'll compromise, and
Trump will say, Well, theycompromised with you.
I didn't compromise with you.
(36:45):
So the Republicans were okaywith spending money on these
programs, but I'm not good withthat, and so I'm just gonna
impound the funds.
And there's gonna be animpoundment case that goes to
the Supreme Court.
My best guess is that theSupreme Court finds that there's
more inherent authority by thePresident to unilaterally refuse
(37:09):
to spend money, not onentitlement, but on uh on
annually appropriated funds,than uh any president has
exercised since Dick Nixon inthe early 1970s.
And if that happens, it doesgive presidents of both parties
a little more authority andresponsibility for renting and
spending.
Ryan (37:28):
Okay, so here's the uh the the other curveball outlier
that I think most people wouldsay are is relatively low odds,
but I'm curious on your take.
Um we see at some point in thenext few years, probably not in
the midterms, but maybe by thenext presidential cycle, uh a
third party try to some sort ofnew third party.
(37:49):
I I know you know Elon Musk'sis Elon Musk has kind of talked
a little bit about thepossibility or at least alluded
to it.
Um, splintering on that alittle bit.
Yeah, he has.
He has.
Once you realized he had allthose SpaceX contracts.
Um But there is still some Ithink the coalition that came
together around Donald Trump haskind of splintered a bit.
(38:12):
And it just makes me wonderwhere what's the likelihood that
the Republican side kind ofcomes back together by the next
presidential cycle?
Bob (38:23):
Um that's a great question.
Like uh I mean, my view is thatwe're probably gonna see JD
Vance nominated on theRepublican side.
He'll probably pick Marco Rubioas his running mate.
On the Democratic side, we haveabsolute chaos.
Uh Gavin Newsom's the frontrunner.
Prediction markets say he hasmaybe a 35% chance of getting
nominated.
I think that's too high.
Ryan (38:41):
Yeah.
Bob (38:41):
I think he is the front runner, but 35% is too high
because I think he has a bigtarget on his back the entire
race, and there are a lot ofother people who are going to be
competing, and you really don'tknow what's going to happen.
Um if you were to tell me thatit ends up being Vance versus
Newsom, give me some grace onthis, because we're almost three
years away.
I'd make Newsom a slightfavorite, just a slight favorite
(39:04):
over over over Vance.
Okay.
Um but the Democrats have a somuch higher chance of nominating
a dud who can't win or is lesslikely to win than Newsome, that
I think the Republicans havemore than a 50% chance of
winning the election.
Because J.D.
(39:24):
Vance has such a high odd theodds of getting that nomination
in the first place.
So Vance Newsom, Newsomfavorite.
Okay, conditional on theDemocrats nominated Newsom.
If Vance versus genericDemocrat, I Vance is the
favorite.
Okay.
Uh Vance versus non-Newsome, uhthe f probably the favorite as
(39:44):
well.
Um so uh in terms of a thirdparty, very unlikely our
political system just pushesagainst it.
Yeah.
Um as we saw in the 1960s andearly 1970s with George Wallace,
as we saw with Ross Perot inthe The 1990s, as we saw with
Strom Thurman in the 1940s, thatour political system, right or
(40:07):
wrong, tends to suppress thirdparties and forces um voters and
politicians with idiosyncraticviews that do not fit neatly
into one party or another topick a party and try to work
through that party to try totake that party over, if you
(40:28):
will, to forward its agenda.
So I I don't think we see a bigthird party, and by big I mean
um 10 percent plus of the vote.
Ryan (40:43):
Yeah.
Bob (40:43):
I don't even think if the odds were like, you know, w w
what are you my odds that somethat any other candidate besides
the Republican or Democrat isgonna get more than five percent
of the national popular vote?
Any one candidate, I'm nottalking about all the third
party candidates combined, butis there gonna be any one
candidate who's gonna get a fivepercent or more, like John
Anderson did, I believe, in1980?
(41:05):
Um uh Well, and Ross Perot didmore recently than that.
Yeah, yeah.
Yeah.
No, but he's he's above the 10percent threshold.
Oh, yeah, yeah.
Ryan (41:13):
Yeah, so he was like he was a real player.
He had an impact on the winnerthat also.
Oh, totally.
Yeah.
Bob (41:17):
Well, yeah.
Most likely.
Yeah.
Well, I actually think Clintonwould have won without it.
Yeah.
Ryan (41:23):
Okay.
Bob (41:23):
Uh a lot of the Ross Perot voters, I don't think, would
have voted.
About a third of them would nothave voted.
And even though the many of thepeople who voted for Perot um
uh think they know why otherpeople voted for Perot, they
really only know why they votedfor Perot.
And I think the vote would havesplit more like 60-40 in Bush's
(41:45):
favor.
And so let's say uh a pro gotwhat, like 70% of the vote?
It it's you know, 33 years ago,so my memory's a little fall.
If he got seven seventeenpercent of the vote, a third of
his voters would not have voted.
So that's 11 percentage pointsnow.
Uh-huh.
And and Bush would have won60-40, those 11.
Yeah, that only would havegained him two to two and a half
(42:06):
percentage points of thepopular vote.
He lost by five, something,four and a half, five.
So he still loses the popularvote.
And probably the ElectoralCollege.
So I I know like there arepeople who do it differently,
but I do it the right way.
So here's the is there going tobe somebody who gets by himself
five percent, like in the fiveto nine and a half percent
(42:29):
range?
I would say unlikely.
Maybe you get somebody in 2032.
I do think there is I do thinkthere is a developing possible
coalition, like an anti-Israelcoalition, like you could have
like the Tucker Carlson, NickFuentes wing of the Republican
(42:50):
Party, and on the other side,the like the dearborn pro-Hamas
side of the Democratic Party,combining and like if you if you
look at these groups, they'rekind of like the prohibitionists
were like a hundred years agoin the sense that they only care
about one issue, only oneissue.
So higher taxes, lower taxes,bigger government, smaller
(43:13):
government, more regulation,less regulation, foreign policy,
tariffs.
They don't care.
As long as you're anti-Israel,they're on your side, right?
So that's that's a group thatmight carve out a right-left
niche, and they could get somesignificant portion of the vote.
Um, probably not enough to tiltan election, but possibly.
(43:34):
Interesting.
Ryan (43:36):
All right.
Well, we are uh closing in onuh the end of our time together,
but I always have uh a finalplea for a book recommendation.
So um, you know, for those thatare uh thinking about doing
some reading over the holidaybreaks, um what uh what book
recommendation would you havefor us this time?
Bob (43:53):
Okay, so I'm gonna recommend a book that I'm
reading right now called UmCapital Losses.
Okay.
Okay, by a guy named RickSpears.
I think his spelling is S-P E ER S.
And I should know the spellingbecause I'm reading his book
right now.
But so this guy wrote a book afew years ago and it reads so
(44:17):
quickly.
It's like a 200, I don't know,250-page book, fiction, like it
just reads so quickly, noflowerly language, very direct.
And basically it's it's afictional character that's
loosely based on on Rick Spears.
Okay, but without all thecorruption and stuff like that,
or at least hopefully.
So he wrote a book a few yearsago called Capital Gains.
(44:40):
Okay, and that is kind of aperiod plea piece that took put
took place in the mid-1990sduring the Clinton
administration.
And it was really interesting.
It gives you a good view ofwhat's happening, like how
Washington works, how thepresidential, how the executive
branch works, how the how thelegislature or Congress works,
(45:00):
how lobbying works, and all likethe swamp in Washington, D.C.
And it was just such aninteresting read and interesting
story.
I loved it.
Like if you if you're going touh sit under a palapa somewhere
in Aruba or Dominican Republicfor a week and don't know what
else to read, get capital gains,read that first, and then buy
capital losses, which is thebook I'm reading right now.
Trevor Burrus, Jr.
Are they related to each other?
(45:21):
Um is one a sequel to theother?
Well, kind of.
But it um it's written a fewyears later.
Yeah.
Um it's fiction or it'sfiction.
Okay.
Totally fiction.
Yeah.
Okay.
Or fiction all.
Ryan (45:34):
Okay.
Bob (45:35):
Um and it was kind of funny.
After reading the first book,because he's an older gentleman.
Uh the uh Rick Spears is alittle bit older than me.
I'm 60.
I th it felt like you'rereading a great piece of fiction
by somebody who had one book inthem their entire life.
Just one.
And that then he retired as alobbyist and finally got to
(45:56):
write his book.
Okay.
Okay, without embarrassing hisco-workers and colleagues and
all that stuff.
Okay.
Um and I always thought, oh,it's too bad he's he didn't
start young enough.
He could have written a wholeseries of books.
And lo and behold, uh, youknow, he sent me this book in
the mail like a uh a few weeksago.
I l I love that first book.
And he is basing the wholething off of um uh like you
(46:18):
know, the Bitcoin exchange guyuh uh that I won't say the
actual name of, and and becominga lobbyist for him.
The guy who has three-letterinitials that uh it it's
fascinating and it's very welldone.
And like I can't wait to likelike we have a Christmas party
tonight, right?
So this is December 8th,Monday, December 8th, as we
(46:42):
speak.
That's right.
Um even though we're not airingfor a couple more weeks.
And we have a Christmas partytonight, but I can't wait till
tomorrow.
I'm I'm traveling back home andI get to read more of more of
the book.
But read capital gains and thenread Rick Spears Capital
Losses.
You can't go wrong.
Ryan (46:58):
Excellent read.
Okay.
Well, as always, thank you foruh joining us on the podcast,
and uh we look forward to a good2026 and having you right back
on.
My pleasure, Ryan.
All right.
And thanks to all of you aswell for joining us on this
episode of the First Trust ROIpodcast.
We'll see you next time andhave a happy Christmas,
Hanukkah, or whatever holidayyou celebrate.
Believe it or not, 2025 is almost in the books.
As we look forward to 2026, wehave midterm elections on the
horizon.
We've got a Fed that's probablygoing to reduce interest rates,
but we will see.
And we wonder what theimplications of all of those
things will be on the U.S.
economy.
Joining me today on the FirstTrust ROI podcast is Bob Stein,
(00:31):
Deputy Chief Economist at FirstTrust.
Thanks for joining us.
This is the final episode of2025.
I feel like the whole year hasbeen building to this episode of
the ROI podcast.
Bob (00:46):
I think that's the correct characterization, Ryan.
Ryan (00:49):
So we're very excited.
Welcome.
Thank you for uh for being apart of this final episode of
the year.
And uh, you know, all theviewers of the podcast, Merry
Christmas.
It's gonna air just beforeChristmas.
Merry Christmas to you as well.
Thank you, Ryan.
Happy Hanukkah to you.
All right.
Very good.
Um so the year has kind offlown by.
(01:10):
Is that uh is that true?
Oh, it definitely has.
It's it's been a meaningful,eventful year, but um it has, I
mean, all of a sudden I blinkand we're at the end of the
year.
Um and looking at next year,it's gonna go just as quickly,
but there are midterm electionson the horizon.
And you know, we don't have tocover the uh at the outset of
(01:32):
our conversation.
We can go into other topicsfirst.
But uh any uh any thoughts orfeelings on generally how those
are gonna go?
Bob (01:40):
Yeah, I think the House elections are gonna go well with
the for the Democrats, and theSenate elections will go just
well enough for the Republicanswhere they keep control of the
Senate.
So um I'll let each individualviewer decide for themselves
whether that's good or bad.
Um but there will never be adull moment with Trump in
(02:01):
office.
I think there's going to be anew precedent set this year uh
when the Republicans have kindof a mid-cycle, if you will, um
convention.
Usually the politicalconventions are only every four
years.
But I think Trump will want todraw attention to the Republican
Party mid-cycle, and I thinkthey're planning on something
(02:23):
probably in Nevada this summer.
Um I believe it's Las Vegas,um, to try to highlight what he
believes the accomplishments ofthe Republicans have been so
far.
Ryan (02:35):
Is there another city in Nevada where they would have a
convention besides Las Vegas?
Well, I mean potentially Reno.
Don't diss on Reno, Ryan.
I didn't mean to, but um itjust seems like I love Reno.
There are a lot of conventionsand a lot of space for
conventions in Las Vegas.
Absolutely.
And you know, I'm I'm sure youwould be averse going to uh Las
Vegas because that whole youknow gambling thing is not your
(02:58):
That would be horrible.
That would be terrible for you.
Okay, so before we dive intotoo much detail of what's coming
ahead, I want toretrospectively get your take on
kind of where we've therethere's a lot of talk early in
the year on what would happen inthe first year of the Trump
presidency.
And I think probably some didand some didn't, but that's my
(03:21):
question for you.
Were there any reallymeaningful changes to policy
that you saw implemented thisyear?
Um I know there's a big taxbill, so maybe maybe that's it.
But um anything that you thinkwas, you know, a really
important thing as we lookforward?
So it's kind of interesting.
Bob (03:39):
Uh uh I was taken by surprise at the speed with which
President Trump was able to gethis um one big, beautiful bill,
as he called it, passed.
And I guess as it was ended upbeing officially called.
Um however, in terms of thepolicy direction, it's not that
much different from what anybodycould have anticipated um when
(04:00):
he was elected, at least on taxpolicy.
Um what was not anticipated,and what the president has been
very aggressive about is takingas much control, seizing as much
control, many people would say,um, of the executive branch as
any president has in multiplegenerations, and trying to put
(04:23):
his stamp on policy making fromthe from the bottom up.
And he did that in the veryfirst days by basically shutting
down uh USAID by going afterthe Department of Education,
shrinking um small businessloans, um as well as uh you know
(04:45):
during the federal shutdown,threatening to fire certain
government workers, and what inwhat he described publicly as
kind of uh uh left-wing, what hedescribed, I want to emphasize
that as like left-wing codedagencies where the federal
workers are almost all opposedto his agenda and almost all
(05:06):
politically hostile to him, atleast by his perception.
Um it's kind of interesting.
If you look at total federalspending, fiscal year that ended
in Sept on September 30th,right before the shutdown, um i
i i i if you look atdiscretionary spending at least,
it was down from discretionaryspending the previous year.
I mean, there's certain thingsthat a president cannot affect
(05:28):
in the short term.
Ryan (05:29):
Is it down in absolute spending or down beyond, down
below what was budgetedspending?
Bob (05:33):
No, no, no.
So if you look at if you takeout I'll be precise in my
language here.
If you take out the things thata president cannot immediately
directly affect entitlement,Social Security, Medicare,
Medicaid, net interest on thenational debt, which is
basically early on baked in thecake based on previous policies
(05:54):
from previous presidents.
What you're left with isdiscretionary spending, which
has to be annually appropriated.
Well, the amount ofdiscretionary spending in fiscal
year 2025 looks like it waslower in absolute dollar terms
than it was in the previousfiscal year, the last full
fiscal year under PresidentBiden.
(06:14):
And that doesn't happen veryfrequently, at least at this
stage of a business cycle, whereyou're deep in the business
cycle, you're not adjustingthings based that much on COVID
or anything like that, to havean outright dollar reduction in
the amount of spending.
And so because of that, thefederal budget deficit, which
was I think 6.3 percent of GDPin the prior fiscal year, the
(06:37):
last full fiscal year underBiden, came in at 5.9 percent of
GDP in the fiscal year thatjust ended.
Now, that's still way too high,totally unsustainable, but it
is lower than it was theprevious year.
And so a lot of people aretalking about all this um all
the fiscal measures taken tostimulate the economy, but when
you look at the overall budgetdeficit, we've gone from
(06:58):
expansionary to contractionaryvery quickly.
And so um I think there isstill an outside chance of
feeling a little bit of thatburden in the short run in the
coming calendar year in terms ofeconomic growth.
I do not expect um a recessionnext year.
I think it's possible, but letmuch less likely than 50 percent
(07:22):
at this point.
But I also feel as if there'snot going to be an overall
economic boom.
I do not see consistent threepercent plus real GDP growth,
much less four percent, likesome uh wild-eyed optimists
might say.
I I think two to two and a halfpercent economic growth, kind
of pedestrian over the nextyear.
Ryan (07:43):
Over the next year.
Do you have any uh earlythoughts on how we're gonna end
up Q4?
Q4?
Bob (07:49):
Well, Q3 isn't even out yet.
So let's talk about that for asecond.
I think Q3 will end up comingin somewhere in the vicinity of
three percent economic growth.
Okay.
Solid quarter.
I think Q4 will come insomewhere in the vicinity of one
and a half percent economicgrowth.
Um I think that there may be alittle temporary weakness
(08:10):
related to the governmentshutdown.
Not that the governmentshutdown is going to cause a
recession.
We should never be concernedabout that.
But it will temporarily slowreal GDP growth or measured GDP
growth, if you will, the way thegovernment accountants keep
track of that.
Um and but remember, thatnumber won't be out until the
(08:30):
earliest late January.
Ryan (08:31):
So I noticed one of the things that you didn't mention,
and maybe because it was umexpected, um it was tariff
policies.
You talked about uh you knowsome of the other policy impacts
and USAID getting cut and someother spending cuts, but um it
seems like tariffs had certainlya big impact on markets, um,
probably on some decisionmaking.
(08:53):
Um do you have any sense ofwhere the future lies,
especially as we head intoanother election year?
And you know, it's not thatmuch longer before uh a
potentially a new party takespower, and if these are, you
know, just uh non-legislatedtariffs, it seems like it'd be
easy to reverse.
So uh what's your what's yourview?
Bob (09:13):
Okay, I think I've said this previously on your program,
Ryan, that I'm a I'm a trainedeconomist, and so I'm gonna take
professional privilege andspeak out of both sides of my
mouth.
Okay?
So bear with me for a second.
Beautiful.
Okay, number one, um I thinktariff policy has been roughly
on par in Trump's first yearwith what any reasonable person
(09:35):
should have been anticipatinghad he won the election, which
he obviously did.
So I don't think there'sanything crazy there about what
he's done so far in terms ofwhat was expected once he got
elected.
Um in terms of like the biggestthing investors should be
focusing on right now, it's thecase that was heard before the
Supreme Court over the lastcouple of months about whether
(09:56):
much, not all, but much of theTrump tariff regime um will
remain in place legally.
And I think the Supreme Courtearly next year is gonna come
out with a ruling striking downmuch of those Trump tariffs.
Not all of them, but I thinkthe 10 percent global tariff, as
well as certain individual uhtariff extra tariffs on certain
(10:18):
countries are gonna be struckdown because he used um this is
what the Supreme Court is gonnasay.
Okay, and I could be wrongabout this, but this is my base
case for what they're gonna sayearly next year.
They're gonna say he exceededthat not that they're
unconstitutional, but that thetariffs exceeded the statutory
mandate of the law that Trumpwas using.
(10:40):
Um emergency powers.
He will, I think, respond tothat case by imposing similar,
not completely the same, butsimilar tariffs based on other
legal authorities, otherstatutes that Congress has
passed, that gives the Presidentthe authority to impose tariffs
based on unfair trade practicesas well as uh running trade
(11:06):
imbalances with those specificcountries.
So he'll he'll have a chance toresuscitate, if you will, these
tariffs.
The other big issue, and thisgoes to fiscal policy, and I'm
gonna go out on a limb, becausethe prediction markets say I'm
gonna be wrong about this, butI'm gonna go out on a limb
anyhow.
I I think the predictionmarkets are wrong about this, is
that the prediction markets saythat not only is the Supreme
(11:28):
Court gonna strike down a lot ofthose tariffs, they're gonna
make the Treasury Departmentrepay the tariffs that have been
collected already.
Okay?
The ones that they strike down.
If there's money collectedbased on that, that's gonna be
like well more than $100billion.
Okay.
I don't think the f I don'tthink the Supreme Court goes
that far.
I think what they're gonna sayis we're gonna strike down these
(11:49):
tariffs, but we don't but butthe government, the Treasury
Department, does not have torepay the ones that have been
collected already.
And the reason I believe istwofold.
Number one, um, I think theidea of issuing an order
requiring the TreasuryDepartment to issue checks
totaling more than $100 billion,which would be unprecedented in
(12:13):
U.S.
history.
I mean, they've struck down alot of laws, but not a fiscal
law like this or a fiscalregulation like this.
I think it it it would makeSupreme Court Justice John
Roberts like like like he mightpuke before he says it.
Like I it's just it's somethingthat it it seems well out of
(12:33):
bounds for what he the role thathe envisions for the Supreme
Court as part of the federalgovernment to issue an order
requiring the TreasuryDepartment to regurgitate more
than $100 billion.
I just think Okay.
And I think the justification,the legal justification will be
that, yes, we know exactly whowrote these checks to the
Treasury Department in the firstplace.
(12:54):
So in theory, we could justsend that money back.
But just because you wrote thecheck to the government doesn't
mean you felt the actual burdenof the tariff.
So, you know, the the analogywill be you know, if if if uh if
a if a city slaps a sales taxon steak, um the owner of the
(13:15):
restaurant cuts the check toChicago or New York City or
wherever, right?
It's the owner of therestaurant.
You don't buy a steak and thenas the patron pay the
government, the the steakhousepays the government, right?
But ultimately the burden isfelt not by the steakhouse, but
by the person who bought thestake, right?
So um I think the Supreme Courtwill say, yes, you know, we
(13:37):
have the list of entities thathave paid this tax, but if we
order a refund, the entitiesthat paid the tax are gonna have
a windfall gain.
You know, if the city refundsthe the to the stakehouse owners
the sales tax on those stakesbecause they find it was illegal
or something to impose that taxin the first place, the guy who
bought the stake ain't gettingthat refund, right?
(13:58):
It's a windfall gain for thestakehouse owners.
Okay, I think that's theSupreme Court's reasoning.
They're gonna say we don't haveto order the refund because
it's not gonna get to the indivthe entities that actually felt
the burden of the tariff itself.
And so they're gonna strikethem down.
Uh Trump, over the ensuingcouple of months, will reimpose
similar, not completely thesame, similar tariffs using
(14:20):
separate powers.
Ryan (14:22):
So do you think the Trump administration will follow
through with their I don't knowif it's a promise or or what,
but they said that they weregonna send out checks to
taxpayers, something like $2,000in checks coming from tariff
revenue.
Trevor Burrus, Jr.
Bob (14:38):
I don't see how they can do that without passing another
tax bill, and as well without uhwhich would have to go through
the reconciliation processbecause they're probably not
gonna get enough Democraticvotes in order to do that.
And so I think it's gonna betough for them to do that.
I don't think I don't see thathappening.
(14:58):
I see the President talkingabout it but it not getting
done, because every dollar theysend out will be a dollar added
to the deficit.
Ryan (15:06):
Right.
Bob (15:06):
Which brings up another question.
Because, like, what's the pointof imposing the tariffs if
you're then just gonna stimulatedemand, much of it, which will
go to uh going to purchaseimported products?
It just doesn't make a lot ofsense.
So uh m my best guess is thatthose extra checks are not gonna
(15:27):
go out.
Some Republicans want to do itsimply because it's an election
year, frankly.
Let's be blunt about it.
Um the other problem that I seeum uh for getting rid of these
tariffs or offsetting the costsis let's say the next president
is Gavin Newsom.
And no promises here.
Okay, I'm just making somethingup.
Let's say the next president isGavin Newsome.
(15:49):
Um he takes over in uh inJanuary 2029.
And let's say, even though hewins and the Democrats control
the House of Representatives,that the Republicans still have
a narrow majority in the U.S.
Senate, which is entirelypossible.
If they do, then Gavin Newsomedoesn't get to pass an income
tax increase.
(16:10):
And so if he simply issuesexecutive orders reversing the
tariff tariffs imposed by theTrump administration, he's gonna
blow a massive hole in theFederal deficit, right?
So um I think a futureDemocratic administration,
unless they sweep, unless theyhave the House and Senate, will
(16:32):
be politically penned in toaccept many of the Trump tariffs
or something similar to themover the course of the next
several years.
Again, even if tr even if theRepublicans don't win the next
election cycle.
Ryan (16:45):
Okay.
Um shifting gears a little bit.
The Fed is going to appoint,most likely appoint, a new chair
in, I believe, May.
Um what is your what's yourtake?
Who's is it going to be theodds-on favorite or is it going
to be some dark horse?
Bob (17:05):
Um so the odds-on favorite is now NEC head Kevin Hassett.
Um I've worked with KevinHassett in the past, or maybe
not worked, right, but we'veinteracted in the past in
Washington, D.C., back when Iwas with the Treasury Department
and perhaps before.
Kevin is a brilliant guy.
He would be an effective Fedchairman.
He he knows the job, he knowswhat to do.
(17:28):
Um he could um he could takethe staff recommendations with a
grain of salt.
He knows monetary policy betterthan Jerome Powell.
Um but I think he would also beperceived not correctly, but
perceived by many in theinvestment community as kind of
um a proxy for the Trumpadministration at the Fed.
(17:51):
And so if he were nominated,and he is the favorite, both the
prediction markets say that,and I believe it, okay, at this
point.
Um I I think I think you mightsee a little bit of a run-up in
the tenure, um, in the tenureyield.
I don't think that's a bigproblem.
I think he would do his jobwell.
(18:12):
Um the the the dark horse atthis point is Kevin Warsh.
If you look at the predictionmarkets, he has something like a
12 percent chance of being thethe next Fed chair.
I think his odds aresignificantly higher than 12
percent.
I think they're more like 30percent or so.
Okay.
I I think um he would also bean very effective Fed chairman.
(18:34):
He would not be perceived bythe financial markets as as much
of a proxy for the Trumpadministration or um um or
associated with the Trumpadministration as Kevin Hassett.
And um I'm probably a littlemore telegenic, not as much of a
monetary expert as I thinkKevin Hassett would be, but
(18:57):
knows financial marketsextraordinarily well.
So uh both of them would bevery good Fed chairmen.
Ryan (19:04):
So the Fed chair kind of gets the credit or the blame for
setting monetary policy, forraising and lowering interest
rates, but there's a committeethere, right?
And and so how much whoever thenext chair is let's say they're
perceived to be more favorableto the Trump administration and
(19:24):
more dovish than they should be.
Do they get to make thedecisions or do they need to
actually move the committee andand how does that work?
Bob (19:30):
That's actually quite interesting, Ryan, because
there's a little bit of intriguehere.
Okay, and I hate to get deep inthe weeds and how the Fed
operates.
So monetary policy is not madeby the Fed Board of Governors
itself, it's made by the FederalOpen Market Committee, Federal
Open the FOMC.
The FOMC consists of all theseven governors, plus a rotating
(19:52):
group of uh Federal Reserve,regional Federal Reserve Bank
presidents.
Always includes the New YorkBank President and several
others.
I forget who's on it this year,but you know, it it it's bigger
than just the governors.
Um theoretically, the majorityon the board of governors, and
(20:14):
once Trump appoints and has thatperson confirmed as the new
chairman, he will have a four tothree majority.
The majority of the board ofgovernors itself, that's seven,
they can they can fire bankpresidents.
Now, legally, it says uh theyhave to have cause.
Okay, that's why, for example,um President Trump, who wanted
(20:37):
Federal Reserve Governor LisaCook fired, couldn't yet,
because she's arguing in court.
There's no cause here.
Um he hasn't proven it, and souh uh you can't fire me yet, and
that's going throughlitigation.
Um and probably won't bedecided for quite some time.
Um but what if there's a 4-3majority on the board itself?
(20:58):
Not the president, the boarditself saying, no, we want this
person fired.
That's a little bit more of agray area than the president
trying to remove a specificmember of the board of
governors, who the presidenthimself theoretically is in
charge of appointing.
That was a biting appointee,but some president was in charge
of appointing.
So there's a little bit of agray area here.
(21:20):
Um I'm not sure how the courtswould come out, but in theory,
the four-three majority on theboard of governors that Trump
will have starting in May couldrun roughshod over the bank
presidents and say, oh, you'renot gonna play ball.
Well, we're gonna remove you.
And so you better play ball.
And so some of them areprobably ideologically inclined
to play ball and vote with thechairman anyhow.
(21:42):
But if they aren't, they mightrun into trouble.
Um and we'll see, we might seethat go to the court system, the
federal court system, and thecourts will might have to get
involved in telling the board ofgovernors no at a Federal
Reserve meeting, you're gonnahave to count this bank
president's vote, even thoughyou didn't let them park at the
Fed that day and didn't let theminto the building.
(22:03):
Like, you know, you littleminutiae like that.
Ryan (22:05):
Yeah.
Bob (22:05):
I mean, in theory, uh they could do that.
Um, so so um uh uh bottom lineis that a 4-3, a board of
governors majority has morepower than a simple 4-3 vote.
Ryan (22:20):
Has there ever been any uh sort of rebellion like that?
Bob (22:26):
So there were there have been stories about, you know,
the the I think it was in themid-1980s when some of the
members of the Board ofGovernors and I don't want to
name name names because I'veforgotten this.
This is like I I knew thisstory better 30 years ago, back
(22:46):
in the 90s.
So um uh in the mid-1980s,where there was more pressure um
coming from individual membersof the Board of Governors on the
chairman to shift monetarypolicy this way or that.
Not in the past 30 years,though.
That really hasn't happened.
Ryan (23:05):
Okay, so let's uh I want to get your more granular views
on the midterms.
Um in terms of, you know, let'sfirst talk about the House and
then the Senate.
You you mentioned that youthink that the Democrats are
maybe a better than 50 percentchance to take the House?
Bob (23:23):
Well better than 50 percent.
Well better than 50 percent.
So um let's put it this way.
Uh historically speaking, theoutparty, and I define out party
by the party not occupying theWhite House, like this cycle
would be the Democrats, but insome cycles uh it's the
Republicans.
Okay, the outparty tends to doextremely well in midterm
(23:45):
cycles.
Um not always.
Sometimes they lose seats, likein 1998 and 2002, unique
situations with the MonicaLewinsky-related impeachment in
98, and in 2002, right after9-11.
Well, not right after, or ayear after in the shadow of
9-11.
So it doesn't always happenthis way, but the Out Party
(24:05):
tends to win seats, um,sometimes substantially.
The Republicans were only aheadafter the end of the last
cycle, 2024, 220 to 215.
So all the Democrats have to dois go plus three in the House,
plus just plus three, andthey're gonna win.
Okay.
That's all they have to do,plus three, then Hakeem Jeffries
(24:25):
becomes Speaker of the House.
Um you look at the results ofthe elections last year, and in
the national House vote, theRepublicans won by 2.7
percentage points.
Okay.
2.7 nationwide in the Housevote.
Um right now the polls show theDemocrats ahead by five points.
(24:50):
And I give them an additionalhalf point because I think the
Democrats will probablyoutperform the polls.
The nature of the Republicancoalition has changed.
They turn out more intensivelythan anticipated in presidential
cycles, less so for specialelections and midterm cycles.
Okay.
So if you go from plus 2.7 tominus 5, and then another half
(25:11):
point, because that's a that's aturnaround of about 8
percentage points, so slightlymore than 8 percentage points in
the popular vote.
So what does 8 percentagepoints look like in terms of the
number of seats?
Okay, I can go into moregranular explanations here, but
I estimate 8 percentage pointsof the popular vote for the
(25:32):
House is worth about 24 seats,three seats per percentage
point.
And so if we were using themaps from 2024, which we're not
completely, the district mapsfrom 2024, I would expect that
if the polls stay where theyare, or the polls are where they
(25:52):
are today, um, 11 months fromnow, that the Republicans will
pick will win 24 fewer seatsthan they won last time.
That'll take them down to 196.
Okay?
So um you need 218 to have amajority, and Republicans are
short.
Now the Republicans have an aceup their sleeves, and they've
been playing it, but so are theDemocrats.
Uh you know, so the Republicansstarted redistricting in
(26:15):
certain states like Texas,they're talking about it in
maybe Indiana, maybe Florida,elsewhere.
Um, but the Democrats have acesup their sleeve, they're
playing that card in California.
They're probably going to playthat card in my home state of
Virginia.
There might be other states aswell.
So, net net of all this, theRepublicans should pick up a few
seats.
But picking up a few seats from196 still doesn't get you to
(26:40):
218.
Maybe it gets you to 200.
Ryan (26:42):
Okay.
Bob (26:43):
But there's another thing going on.
And this is something that Ihave trouble quantifying, which
is that it is possible thatearly next year, at least by
June, but possibly early nextyear, the Supreme Court may have
reinterpreted the Voting RightsAct to give certain Southern
(27:05):
states, Southeast United Statesin particular, more leeway in
how they draw the districtlines.
And if they allow those statesmore flexibility in where they
draw the district lines, thatcould add to a much larger
bonanza for the Republicans interms of the number of seats.
Now, I have a lot of trouble.
It's a very ambiguoussituation.
(27:26):
I can't statistically tell youwhat are the odds of the Supreme
Court making this decision inthe Republicans' favor, what are
the odds of them doing it earlyenough, and what are the odds
of each of these states actingon this greater leeway before
the 2026 election cycle uh um isthrough.
Okay, uh that's too muchambiguity.
(27:47):
Um I'm not an expert on that.
I don't think anybody's anexpert on that, because it's a
one-time scenario.
Yeah.
Okay, you can't model that.
Um so I'm assuming they pick upmaybe five more from that as
well.
So my best guess right now, interms of the number of seats
that the Republicans are goingto win, um would be something
like 206.
If you hold a gun to my headtoday, 206.
(28:10):
Okay, because I'm assuming thatboth the Voting Rights Act case
and the other redistricting,non-ro not related to the voting
rights act case, adds a totalof 10.
But it could end up being 25.
Like if if all the VotingRights Act redistricting goes
totally the Republicans' way.
So, net of all this, I thinkthe Democrats have about an 80
(28:32):
percent chance of taking backthe House.
The one thing I know for sureis that number is liable to
change significantly in thefirst half of next year as we
see what the states do and whatwe see uh how we see the Supreme
Court um reacting to the casethat was heard last year.
Ryan (28:50):
So you just said that this could happen early in the year
next year, but as late as June.
So do you mean to say that thelines for the congressional
districts could be changing?
So if I live somewhere, the uhrace that I'm actually voting in
could change as late as well.
Bob (29:08):
Well, you live in upstate New York.
So that's not going to be aVoting Rights Act state.
Right.
But it could happen in some ofthose states.
It also depends on what statelaw says about when they have to
finalize their district lines.
And I I am not an expert on astate-by-state basis of what
those say.
Yeah.
Um so it's such an ambiguousone-off situation that I'm I'm
(29:32):
reluctant to completely committo how many seats the
Republicans are going to gain.
It could be zero in this cycle,and then maybe fifteen or
twenty in the following cycle in2028.
Um but it could end up being abonanza in this cycle, and I
don't think um it should bewritten off completely.
Okay.
A lot of variants there.
Ryan (29:52):
Trevor Burrus, Jr.
So you said that the Democratsare likely to take the House,
but the Senate is likely to staywith the Republicans.
Of course, Senators only go upfor election once every six
years, right?
So the every third cycle.
Yeah.
So is that why the differenceexists in this cycle?
Bob (30:09):
Uh in part, yes.
Okay.
But it's also like which statewhich states are up for election
in this particular cycle.
Yeah.
So there are a lot moreRepublicans that have to defend
their seats than Democrats inthis cycle in 2026.
So superficially, if you hearthat, you're thinking, oh,
there's a lot more downside riskfor the Republicans than the
Democrats.
(30:29):
They can easily lose the three,um, or actually four, so that
the Democrats would takecontrol.
Right now, the Republicans have53 seats in the U.S.
Senate.
If it's 50-50, if they onlylose three, J.D.
Vance breaks ties, right?
Right.
So assuming nobody dies in theinterim, J.D.
Vance breaks the ties, theRepublicans would still would
still have nominal control.
(30:49):
And so the Democrats have togain four to take control.
I don't think they're going togain four.
Because even though the de theRepublicans have to defend more
seats, of the 22 seats they haveto defend, 20 of them are in
what I would describe as red orRepublican states.
States that are highly likelyto go for a Republican in a
(31:10):
presidential cycle.
And if you look backhistorically, there are wave
elections that include theSenate, big swings and Senate
races.
They usually occur in midtermswithin the purple states.
Not always, okay, but generallywithin per whatever the purple
states were at the time.
Okay, and what what is a purplestate has changed over time,
(31:33):
which are red, which WestVirginia used to be a blue
state, now it's a red state, uh,et cetera.
But it's usually the thegenerally centrist states where
uh if it's a Republican wave,then like you'd see a lot of
losses among Democrats in purplestates.
And if it's a Democratic wave,you'll see a lot of losses by
(31:54):
Republicans running forre-election in purple states.
It wouldn't really affect theblue and the red states that
much.
So of the 22 seats that are upfor grabs that the Republicans
have to defend, 20 of them arein red Republican states.
And I think probably at most,um the Democrats will gain one
(32:14):
of them.
Unnet.
One of them.
Okay, just uh maybe zero, evenif they have a good year.
So they're gonna train most oftheir fire on two states, the
Democrats will, Maine and NorthCarolina.
Um in North Carolina, I thinkthey're gonna win.
Tom Tillis, the incumbentRepublican, decided not to run
for re-election.
That's good for the Democrats.
And number two, it looks likeRoy Cooper, the former governor
(32:38):
of the state, popular two-termgovernor, is gonna run for
re-election.
He has a relatively moderateimage, and because of that, I
think he probably wins.
So that's a pickup for theDemocrats.
Um Maine is also a statethey'll target.
Uh that has a Republicansenator.
It's a purple state.
Susan Collins, however, isrunning for re-election, and she
(33:00):
has a proven track record ofwinning, even in years that are
hostile to the Republican Partyin general.
So, for example, she won thatseat back in 2008.
John McCain was getting thefloor wiped with him by Barack
Obama by seven and a half, sevenor eight percentage points,
national popular vote.
Susan Collins wins easily inthe state of Maine.
2020 rolls around.
(33:21):
That was the last time she wasup for re-election.
Um, Joe Biden beats DonaldTrump by four and a half points
in the in the national popularvote.
Susan Collins was behind inevery single statewide poll in
the state of Maine in Octoberand early November, every single
one.
She ended up winning easilythat year.
So I think in the end, she'llwin.
(33:42):
Democrats have some problems oftheir own.
John Ossoff, state of Georgia,not particularly popular.
If they're if the Republicanshave enough common sense to
nominate a non-mega Republican,in the state of Georgia, they
have a fighting chance.
Minnesota, Tina Smith, um uhMichigan, Gary Peters, and Gene
Shaheen and New Hampshire allretiring for the Democrats.
(34:06):
So those would those would bestates where the Democrats would
win if they had the incumbents,but because they're retiring,
Republicans have a fightingchance.
I think of those three, theRepublicans probably have their
best chance in Michigan.
Um I'd give the Democrats aslight edge, but only slightly.
Uh whether or not they keepthat state may hinge on who they
nominate.
If they nominate somebody who'sum uh strongly supported by
(34:30):
Dearborn, Michigan, they'llprobably lose.
Okay.
If they nominate somebodyoutside of Dearborn, um I give
them a slight edge.
So I I think that in the end,uh net net, Republicans today
are 53, they probably lose oneon net and end up with 52 seats
in the U.S.
Senate.
So lose the House, um, keep theSenate, but lose uh on net a
(34:54):
seat in the Senate.
Ryan (34:55):
Okay, so let's say things play out in the midterm
elections, kind of as yourexpectations um say, and we've
got a Republican uh Senate,Democrat uh House, and of course
Donald Trump in the presidency.
What are the implications forpolicy kind of going forward for
(35:15):
the last two years of the Trumpadministration?
Bob (35:17):
Okay, so if I'm right, then Donald Trump has four years to
be our foreign foreign policypresident, including on the
issue of tariffs to some extent.
Um he's got four years toappoint people to the federal
courts, including should therebe a vacancy to the Supreme
Court.
He's got four years to runroughshod over the executive
agencies and departments andhire and fire whomever he darn
(35:38):
well pleases, because theSupreme Court looks like it's
ready after the hearing today togive the president um
additional powers to hire andfire and overturn something that
the a court case from 90 yearsago called Humphrey's Executor
that was came out during the uhFDR administration.
Um so he's gonna have all thosepowers, but he's only got two
(36:00):
years to legislate, and thefirst year is almost done.
So starting in in my belief mybelief is that starting in
January 2027, every piece oflegislation that gets to his
desk is gonna have to be atleast a little bit bipartisan to
get there.
So what does that mean?
They're gonna pass theappropriations bills in the last
if I'm right about the outcomeof the election, they'll pass
the appropriations bills, andthen Trump is gonna push his
(36:24):
executive power to the hilt andrefuse to spend all the money on
the priorities the Democratsnegotiate up on Capitol Hill,
which is gonna make thenegotiation process even
tougher, right?
Because the Republicans onCapitol Hill will say, Oh, we'll
compromise with you, Democrats,and they'll compromise, and
Trump will say, Well, theycompromised with you.
I didn't compromise with you.
(36:45):
So the Republicans were okaywith spending money on these
programs, but I'm not good withthat, and so I'm just gonna
impound the funds.
And there's gonna be animpoundment case that goes to
the Supreme Court.
My best guess is that theSupreme Court finds that there's
more inherent authority by thePresident to unilaterally refuse
(37:09):
to spend money, not onentitlement, but on uh on
annually appropriated funds,than uh any president has
exercised since Dick Nixon inthe early 1970s.
And if that happens, it doesgive presidents of both parties
a little more authority andresponsibility for renting and
spending.
Ryan (37:28):
Okay, so here's the uh the the other curveball outlier
that I think most people wouldsay are is relatively low odds,
but I'm curious on your take.
Um we see at some point in thenext few years, probably not in
the midterms, but maybe by thenext presidential cycle, uh a
third party try to some sort ofnew third party.
(37:49):
I I know you know Elon Musk'sis Elon Musk has kind of talked
a little bit about thepossibility or at least alluded
to it.
Um, splintering on that alittle bit.
Yeah, he has.
He has.
Once you realized he had allthose SpaceX contracts.
Um But there is still some Ithink the coalition that came
together around Donald Trump haskind of splintered a bit.
(38:12):
And it just makes me wonderwhere what's the likelihood that
the Republican side kind ofcomes back together by the next
presidential cycle?
Bob (38:23):
Um that's a great question.
Like uh I mean, my view is thatwe're probably gonna see JD
Vance nominated on theRepublican side.
He'll probably pick Marco Rubioas his running mate.
On the Democratic side, we haveabsolute chaos.
Uh Gavin Newsom's the frontrunner.
Prediction markets say he hasmaybe a 35% chance of getting
nominated.
I think that's too high.
Ryan (38:41):
Yeah.
Bob (38:41):
I think he is the front runner, but 35% is too high
because I think he has a bigtarget on his back the entire
race, and there are a lot ofother people who are going to be
competing, and you really don'tknow what's going to happen.
Um if you were to tell me thatit ends up being Vance versus
Newsom, give me some grace onthis, because we're almost three
years away.
I'd make Newsom a slightfavorite, just a slight favorite
(39:04):
over over over Vance.
Okay.
Um but the Democrats have a somuch higher chance of nominating
a dud who can't win or is lesslikely to win than Newsome, that
I think the Republicans havemore than a 50% chance of
winning the election.
Because J.D.
(39:24):
Vance has such a high odd theodds of getting that nomination
in the first place.
So Vance Newsom, Newsomfavorite.
Okay, conditional on theDemocrats nominated Newsom.
If Vance versus genericDemocrat, I Vance is the
favorite.
Okay.
Uh Vance versus non-Newsome, uhthe f probably the favorite as
(39:44):
well.
Um so uh in terms of a thirdparty, very unlikely our
political system just pushesagainst it.
Yeah.
Um as we saw in the 1960s andearly 1970s with George Wallace,
as we saw with Ross Perot inthe The 1990s, as we saw with
Strom Thurman in the 1940s, thatour political system, right or
(40:07):
wrong, tends to suppress thirdparties and forces um voters and
politicians with idiosyncraticviews that do not fit neatly
into one party or another topick a party and try to work
through that party to try totake that party over, if you
(40:28):
will, to forward its agenda.
So I I don't think we see a bigthird party, and by big I mean
um 10 percent plus of the vote.
Ryan (40:43):
Yeah.
Bob (40:43):
I don't even think if the odds were like, you know, w w
what are you my odds that somethat any other candidate besides
the Republican or Democrat isgonna get more than five percent
of the national popular vote?
Any one candidate, I'm nottalking about all the third
party candidates combined, butis there gonna be any one
candidate who's gonna get a fivepercent or more, like John
Anderson did, I believe, in1980?
(41:05):
Um uh Well, and Ross Perot didmore recently than that.
Yeah, yeah.
Yeah.
No, but he's he's above the 10percent threshold.
Oh, yeah, yeah.
Ryan (41:13):
Yeah, so he was like he was a real player.
He had an impact on the winnerthat also.
Oh, totally.
Yeah.
Bob (41:17):
Well, yeah.
Most likely.
Yeah.
Well, I actually think Clintonwould have won without it.
Yeah.
Ryan (41:23):
Okay.
Bob (41:23):
Uh a lot of the Ross Perot voters, I don't think, would
have voted.
About a third of them would nothave voted.
And even though the many of thepeople who voted for Perot um
uh think they know why otherpeople voted for Perot, they
really only know why they votedfor Perot.
And I think the vote would havesplit more like 60-40 in Bush's
(41:45):
favor.
And so let's say uh a pro gotwhat, like 70% of the vote?
It it's you know, 33 years ago,so my memory's a little fall.
If he got seven seventeenpercent of the vote, a third of
his voters would not have voted.
So that's 11 percentage pointsnow.
Uh-huh.
And and Bush would have won60-40, those 11.
Yeah, that only would havegained him two to two and a half
(42:06):
percentage points of thepopular vote.
He lost by five, something,four and a half, five.
So he still loses the popularvote.
And probably the ElectoralCollege.
So I I know like there arepeople who do it differently,
but I do it the right way.
So here's the is there going tobe somebody who gets by himself
five percent, like in the fiveto nine and a half percent
(42:29):
range?
I would say unlikely.
Maybe you get somebody in 2032.
I do think there is I do thinkthere is a developing possible
coalition, like an anti-Israelcoalition, like you could have
like the Tucker Carlson, NickFuentes wing of the Republican
(42:50):
Party, and on the other side,the like the dearborn pro-Hamas
side of the Democratic Party,combining and like if you if you
look at these groups, they'rekind of like the prohibitionists
were like a hundred years agoin the sense that they only care
about one issue, only oneissue.
So higher taxes, lower taxes,bigger government, smaller
(43:13):
government, more regulation,less regulation, foreign policy,
tariffs.
They don't care.
As long as you're anti-Israel,they're on your side, right?
So that's that's a group thatmight carve out a right-left
niche, and they could get somesignificant portion of the vote.
Um, probably not enough to tiltan election, but possibly.
(43:34):
Interesting.
Ryan (43:36):
All right.
Well, we are uh closing in onuh the end of our time together,
but I always have uh a finalplea for a book recommendation.
So um, you know, for those thatare uh thinking about doing
some reading over the holidaybreaks, um what uh what book
recommendation would you havefor us this time?
Bob (43:53):
Okay, so I'm gonna recommend a book that I'm
reading right now called UmCapital Losses.
Okay.
Okay, by a guy named RickSpears.
I think his spelling is S-P E ER S.
And I should know the spellingbecause I'm reading his book
right now.
But so this guy wrote a book afew years ago and it reads so
(44:17):
quickly.
It's like a 200, I don't know,250-page book, fiction, like it
just reads so quickly, noflowerly language, very direct.
And basically it's it's afictional character that's
loosely based on on Rick Spears.
Okay, but without all thecorruption and stuff like that,
or at least hopefully.
So he wrote a book a few yearsago called Capital Gains.
(44:40):
Okay, and that is kind of aperiod plea piece that took put
took place in the mid-1990sduring the Clinton
administration.
And it was really interesting.
It gives you a good view ofwhat's happening, like how
Washington works, how thepresidential, how the executive
branch works, how the how thelegislature or Congress works,
(45:00):
how lobbying works, and all likethe swamp in Washington, D.C.
And it was just such aninteresting read and interesting
story.
I loved it.
Like if you if you're going touh sit under a palapa somewhere
in Aruba or Dominican Republicfor a week and don't know what
else to read, get capital gains,read that first, and then buy
capital losses, which is thebook I'm reading right now.
Trevor Burrus, Jr.
Are they related to each other?
(45:21):
Um is one a sequel to theother?
Well, kind of.
But it um it's written a fewyears later.
Yeah.
Um it's fiction or it'sfiction.
Okay.
Totally fiction.
Yeah.
Okay.
Or fiction all.
Ryan (45:34):
Okay.
Bob (45:35):
Um and it was kind of funny.
After reading the first book,because he's an older gentleman.
Uh the uh Rick Spears is alittle bit older than me.
I'm 60.
I th it felt like you'rereading a great piece of fiction
by somebody who had one book inthem their entire life.
Just one.
And that then he retired as alobbyist and finally got to
(45:56):
write his book.
Okay.
Okay, without embarrassing hisco-workers and colleagues and
all that stuff.
Okay.
Um and I always thought, oh,it's too bad he's he didn't
start young enough.
He could have written a wholeseries of books.
And lo and behold, uh, youknow, he sent me this book in
the mail like a uh a few weeksago.
I l I love that first book.
And he is basing the wholething off of um uh like you
(46:18):
know, the Bitcoin exchange guyuh uh that I won't say the
actual name of, and and becominga lobbyist for him.
The guy who has three-letterinitials that uh it it's
fascinating and it's very welldone.
And like I can't wait to likelike we have a Christmas party
tonight, right?
So this is December 8th,Monday, December 8th, as we
(46:42):
speak.
That's right.
Um even though we're not airingfor a couple more weeks.
And we have a Christmas partytonight, but I can't wait till
tomorrow.
I'm I'm traveling back home andI get to read more of more of
the book.
But read capital gains and thenread Rick Spears Capital
Losses.
You can't go wrong.
Ryan (46:58):
Excellent read.
Okay.
Well, as always, thank you foruh joining us on the podcast,
and uh we look forward to a good2026 and having you right back
on.
My pleasure, Ryan.
All right.
And thanks to all of you aswell for joining us on this
episode of the First Trust ROIpodcast.
We'll see you next time andhave a happy Christmas,
Hanukkah, or whatever holidayyou celebrate.
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