How Political Gridlock and Deficit Spending Threaten America's Future: Tom Bilyeu Debates Stephen Bonnell Pt. 1

Summary

Podcast Summary: Impact Theory with Tom Bilyeu – "How Political Gridlock and Deficit Spending Threaten America's Future: Tom Bilyeu Debates Stephen Bonnell Pt. 1"

Date: November 11, 2025

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Episode Overview

In this lively and complex episode, Tom Bilyeu debates political commentator and streamer Stephen Bonnell (Destiny) about the current and future state of American politics and economics, focusing on political gridlock, deficit spending, and the risks these pose to America’s leadership and social stability. The conversation covers current political shifts (including the election of a socialist mayor in New York), gridlock in both parties, the inability for sincere economic debate, the long-term dangers of unsustainable debt, and how short-term political incentives are undermining America’s fiscal future. The two challenge and probe each other on party dynamics, economic principles, and the fundamental threats to American prosperity.

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Key Discussion Points & Insights

1. The Election of a Socialist Mayor in New York City ([01:03]–[03:13])

• Bonnell opens by questioning the implications of New York electing a socialist mayor, asking if it signals a new direction for Democrats.
• Tom Bilyeu: “I feel like everybody's over-indexing on this election a lot based on what they want to see... It's New York City, it's a very blue place... I think it'll probably more or less be business as usual in New York City.” [01:34]
• Tom notes the new mayor is “good on camera,” suggesting media savvy is more important than policy positions in today’s politics.

2. Policy Experimentation & Political Gridlock ([03:13]–[04:30])

• Bonnell asks if Tom sees this as a real opportunity for socialist economic policies, or just more gridlock.
• Tom: “Generally the left doesn't overstep their legal authority... It's just not going to be possible. He's either not going to have the funding or the legal authority for it.” [02:39]
• Tom welcomes experimentation: “If [left policies] fail, I can just point and go, 'look, these are bad ideas'... If it works, then maybe I reconsider.” [02:39]

3. The Need for “Red Teaming” and Policy Debate ([03:42]–[04:32])

• Tom introduces the concept of “red teaming”—each party acting as a check to keep the other honest.
• “I don't know if real stuff can happen without red teaming. And I kind of view politics very similarly. Left to their own devices, I don't know if either political party could figure stuff out on their own.” [03:50]
• Tom laments the “completely abandoned policy conversation” on the right, arguing that polarization has destroyed good-faith debate.

4. Housing Crisis and Political Incentives ([04:32]–[07:04])

• Both discuss the intractability of the U.S. housing problem.
• Tom: Points out most voters are entrenched homeowners who block reform and that true solutions would hurt this powerful voting bloc.
  • “If you want to bring down rents or the cost of housing, you are necessarily hurting people that already have homes. And I've never heard a single politician confront that reality.” [04:32]
• Bonnell: Expands on NIMBYism, “When I look at the NIMBYism, there is a point at which so many things have come together where everybody is pushing for only their sole interest, that we begin to bake into the structure of the economic system itself, all these deranging elements.” [06:48]

5. Dangers of Self-Interest and “Structural Derangement” ([06:48]–[10:12])

• Bonnell warns that self-interest accumulates into systemic risk and historical cycles of disenfranchised youth rising up.
• “There's a historical pattern that says you do not want to disenfranchise the young, as they will completely flip the tables over and they will come for your head.” [Approx 07:24]
• Tom reiterates: parties have ceased to serve their check-and-balance roles, and the vacuum leads to experiments with policy extremes.

6. Economics of Price Controls: Left vs. Right ([10:12]–[12:06])

• Tom explains the distinction between “price control-y” left (caps on rents, insulin, minimum wage) vs. free-market right.
• He emphasizes the dangers of both unchecked leftward movement (market distortions) and the right's lack of constructive opposition.

7. Party Incentives & Political Dysfunction ([12:57]–[14:31])

• Tom and Bonnell examine today’s left/right dynamic, agreeing that:
  • Politicians are motivated by re-election, not solving root economic problems or learning how the economy functions.
  • Populist policies (“salt water to the thirsty”) are emotionally satisfying but often ruinous.
• Bonnell: “Imam Donnie is so impressive in that he really understands the pain...but he's approaching people that are dying of thirst and offering them salt water.” [13:26]

8. Historical Case Against Rent Control & Socialism ([14:41]–[18:24])

• Tom: “Rent control is a bad policy. Forget New York. It's been analyzed basically all over the world and it doesn't really work. But we also do it everywhere.”
• Bonnell’s warning: Socialism’s historical tendency is to silence dissent when policies fail. References Gulag Archipelago, Mao: The Unknown Story, and Red Famine as warnings.

9. Framing the Fiscal Crisis: Deficit Spending and Debt ([18:51]–[23:01])

• Bonnell: Both parties are irresponsible spenders, but fears Democrats' future trajectory even more.
  • “The Republicans are unhinged lunatics when it comes to spending...And the only people worse than the Republicans are the Democrats. So that's terrifying.” [18:51]
• Tom counters with data: “98% of all jobs made in the past 50 years have come under Democrats. The last balanced budget we had was under a Democrat...it's really hard for me to understand.” [19:38]

10. “Red Bull in Vegas” Analogy ([24:52]–[27:37])

• Tom illustrates deficit spending and party negotiation by using a road trip analogy.
• Democrats want to restore social programs (SNAP, Medicaid), Republicans want to keep tax cuts; both spin deficits, but Tom argues Dems would never have solidified Trump’s massive tax cuts.
  • “For the Democrats [they] would have never solidified those tax cuts...the budget would have been closer to balanced...I just don’t understand how we ever look at them and go, they’re worse because they want to fight for SNAP and Medicaid when it’s the Republican budget that was so much more dumbly done.” [25:46]

11. Economic Fragility: Debt-to-GDP and Risk of Default ([27:37]–[30:24])

• Bonnell: Lays out why high debt-to-GDP (over 130% for more than 18 months; we’re at 122% and rising) nearly always leads to violence or default.
  • “When a country defaults, it is so catastrophic, it doesn’t sound scary, but it’s like, terrifying because you become uninvestable...that is a nightmare scenario the likes of which I really don't want to live through.” [29:19]
• This existential fear dominates his political calculus.

12. Trump’s Economic Record vs. Democratic Alternatives ([30:58]–[33:27])

• Tom points out that Trump has pursued distinctly interventionist and market-distorting policies (shares in industries, tariffs) that are “a Bernie Sanders wet dream.”
  • “If you're worried about socialism, how do you feel about the fact that Trump now with the United States is getting shares...that's a social–that's like an AOC Bernie Sanders wet dream.” [31:03]
• Bonnell: Trump’s tariffs and trade policy are “moronic” and possibly indefensible, but he remains skeptical Democrats would be more responsible in practice.

13. America’s Manufacturing, Comparative Advantage, and China ([34:50]–[46:47])

• Deep debate over reliance on China for manufacturing.
• Tom: Productivity and comparative advantage should be the economic north star; U.S. excels at high-value, high-tech work.
• Bonnell: National security and international dominance should be the north star; U.S. gutted manufacturing, empowering China economically and strategically.

14. Shrinking Middle Class and Income Stagnation ([49:55]–[51:17])

• Bonnell: Disappearance of manufacturing jobs has undercut U.S. negotiating power for average workers; critical of both parties’ failure to address this.
• Tom: American living standards are still the world’s envy, consumer is strong, and global comparisons matter.

15. Deficit Spending, Inflation, and Wealth Inequality ([53:59]–[58:54])

• Bonnell: Deficit spending inflates asset prices, making the rich richer, poor poorer: “Deficit spending...is mechanistically [increasing] the wealth inequality.”
• Tom: Obama and Biden trended toward more balanced budgets; Trump’s policies (tax cuts, weaker IRS, tariffs as taxes) made all fiscal problems worse.
  • “Everything I've seen Trump do is horrible. Kamala wouldn't have solidified the tax cuts...And then we wouldn't be doing this weird tariff thing so we could negotiate better trade deals if we wanted to, while we would at least continue to have the poorest people be able to afford the things that they want without disproportionately taxing them...” [59:37]

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Notable Quotes & Memorable Moments

• Tom Bilyeu:
  • "Left to their own devices, I don't know if either political party could figure stuff out on their own." [03:50]
  • “If you bring up the cost of minimum wage too much, maybe companies start paying more and more employees under the table...or they just shut down.” [11:00]
  • “Everything I've seen Trump do is horrible. Kamala wouldn't have solidified the tax cuts...We wouldn't be doing this weird tariff thing...” [59:37]
• Stephen Bonnell:
  • “If you want to bring down rents or the cost of housing, you are necessarily hurting the people that already have homes. And I've never heard a single politician confront that reality.” [04:32]
  • “When a country defaults, it is so catastrophic, it doesn't sound scary, but it's like, terrifying because you become uninvestable. So your country just gets stuck. That is a nightmare scenario...” [29:19]
  • “The Republicans are unhinged lunatics when it comes to spending... The only people worse than the Republicans are the Democrats. So that's terrifying.” [18:51]
  • “Imam Donnie... is approaching people that are dying of thirst and offering them salt water.” [13:26]

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Important Segment Timestamps

• [01:03] — Kickoff, New York's socialist mayor election
• [03:42] — "Red teaming" and checks and balances
• [04:32] — Housing crisis and homeowner incentive
• [10:12] — Absence of constructive opposition (“red team”) in politics
• [14:41] — Dangers of rent control and socialism, historical perspective
• [18:51] — Both parties' fiscal irresponsibility/debt discussion
• [24:52] — Tom’s “Red Bull in Vegas” analogy on party spending
• [27:37] — Why debt-to-GDP over 130% is historically catastrophic
• [29:19] — The nightmare of U.S. default; what’s at stake
• [34:50] — U.S.-China manufacturing, comparative advantage
• [49:55] — Decline of U.S. worker negotiating power
• [53:59] — Rising interest payments, inflation, and asset inequality
• [59:37] — Administrative levers to boost revenue (IRS, trade, tax strategy)

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Summary: Takeaways & Tone

This episode is a highly engaged, sometimes fiery debate where both speakers hold the other to a high standard of reasoning. Bonnell brings deep historical anxiety about the consequences of unchecked government debt and deficit spending, seeing both parties as complicit but viewing current left-wing energy as especially dangerous in the long run. Bilyeu counters with the actual record on job creation, fiscal responsibility, and points out recent Republican economic policies have been more extreme, more costly, and directly harmful.

Throughout, both emphasize the lost art of serious policy discussion, the dangers of political incentivization over long-term prudence, and the need for honest debate.

To be continued in Part 2...

Transcript

[Tom Bilyeu]

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[Stephen Bonnell]

Stephen Bonnell welcome back.

[Tom Bilyeu]

Tom billyeu thanks for coming by, dude.

[Stephen Bonnell]

I appreciate it and I appreciate you letting us use your studio. You are always extremely generous, which makes this so much easier for us. So really, really grateful for your time and for just the hospitality. Okay, we just had a socialist elected to the be mayor of the biggest financial city in what do you take away from that? Do you think that that's going to make New York City better? Is this a good direction for the Democrat Party or else?

[Tom Bilyeu]

I feel like everybody's over indexing on this election a lot based on what they want to see. The far left people online are saying this is the proof of concept that the whole Democratic Party is going to go to the socialist direction. I think conservatives are saying this is evidence of Islamic jihadists winning elections. Or see, that's the really ridiculous other people saying like, oh, the whole Democratic Party is becoming socialist. But I mean it's New York City, it's a very blue place. He won his primary. When the primary was won, he was basically going to win. Cuomo probably not the best person to try to run against him for that. It's not his time anymore. I think Mamdani ran a good campaign. His stuff is funny. If you watch the videos, I almost feel like I'm watching cutouts from the Daily show from the 2000s. He's a funny dude. He's good on camera, which is one of the most important things unfortunately in today's media environment. So yeah, I think it'll probably more or less be business as usual in New York City for better or for worse.

[Stephen Bonnell]

Do you Think it'll be business as usual because he'll be stymied and he won't be able to get the policies through. Do you think it'll be business as usual because he calms down some of the more what I would call socialist, like just blatantly socialist rhetoric. What's going to make it be business as usual?

[Tom Bilyeu]

Generally the left doesn't overstep their legal authority. Like I would say MAGA or the right does. So I think that for a lot of stuff, it's just not going to be possible. He's either not going to have the funding or the legal authority for it. And then for other stuff, I mean, I don't know. I welcome it. He's significantly to the left of me on a lot of economic policy. So if he tries stuff and it fails, then I can just point to that and go, look, these are bad ideas, we shouldn't do them anymore. If he tries it and it works, then maybe I reconsider. Maybe somehow there's some kind of external force that makes it so. The city backing grocery stores or the city investing more in rent control properties is actually a good thing. And then I would change my views on it.

[Stephen Bonnell]

How are you approaching the issue? Are you looking at this going, okay, well, the economy is obviously broken. We obviously need to do some. Something different. I have a rough idea of what we should do, but hey, if he's got ideas, let him go at it. Or are you approaching this from a building, the economy, sort of brick by brick, these things adhere to a set of rules. And I think that the way he's positioning this, it's more in line with the way that economies work.

[Tom Bilyeu]

I don't know if we've talked about this personally or on camera before, but have we ever talked about the concept of like red teaming?

[Stephen Bonnell]

Yes. I don't know that we've talked about it. I'm intimately familiar.

[Tom Bilyeu]

Yeah, I don't know if like, real stuff can happen without red teaming. And I kind of view politics very similarly. Like left to their own devices, I don't know if either political party could figure stuff out on their own. I feel like having another side there to kind of keep you honest and to kind of check you on a lot of things is where the best kinds of discussion happen. And I would obviously say that the right has completely abandoned all forms of policy conversation for the past year. So I don't think we're even remotely able to approach solving any of the economic issues that we have right now in this country because there's no serious way to have a conversation about it. I don't consider it like super big price policy to be a serious way of dealing with stuff like housing or cost of living. But there's like no counterpart to that right now. So.

[Stephen Bonnell]

Yeah, what do you mean there's no counterpart to it?

[Tom Bilyeu]

As in, I don't know what the. There's not a serious policy discussion about what do we do about housing in the United States. Nobody is. We're not capable of having that conversation right now because it's a very difficult conversation to have that's going to require some pain in different areas that people aren't willing to give on, I guess. Like for instance, like when it comes to housing people, the thing that you keep hearing over and over again is that housing's unaffordable, rents are too high. You hear that? That's like the popular talking point. The reality point is that it's like 70% of Americans live in an owned home. And these are your strongest voters because people that have houses are probably older, they're more committed to an area, they're more likely to go out and vote. If you want to bring down rents or if you want to bring down the cost of housing, you are necessarily hurting the people that already have homes. And I've never heard a single politician confront that reality. So there's a delusional fantasy where people, people pretend that they can protect homeowners, which are some of the most like loyal, like voting based people, but you can also bring down rents and the price and cost of housing for everybody else, which is not possible. And also these, the people that get hurt the most by high costs of housing are people who aren't even capable of voting because technically the people that are hurt the most, people who aren't even able to move to an area because the cost of housing is prohibitively high. So it's a really weird. Housing is a weird issue that's hard to solve in a democratic manner.

[Stephen Bonnell]

If I'm tracking what you're saying. The reason that it's hard to solve in a democratic manner is because the very people that want the policies to be strict, the NIMBYism, not in my backyard, those people are always going to try to vote it down. They have the most political power. They're older, they're more entrenched, more connected, all of that, they've got more money to back elections. So all of that momentum pushes them in the direction of not only voting against reform policies, but they have the power to like see it all the way through the system.

[Tom Bilyeu]

Yeah. And it's in their interest to do so. They should be voting that way. Technically, they would be making a sacrifice to vote otherwise. Imagine you buy a home and then the next week they talk about building massive high rises, you know, in your area. Well, that's going to bring the cost of your house down or it's not going to go up as quickly. You don't want that, like, now that you have a home, like, you want to. You know how many people say the house is the most important investment or the largest investment of any American? Well, I don't want you to build a whole bunch of new properties that are going to drive down rents and ultimately the cost of real estate. So you become incentivized to vote against the greater interest of the economy of the city or whatever, in favor of protecting your own narrower interest of your particular housing price.

[Stephen Bonnell]

It's interesting. You're very right about that. And I think one of the reasons that the capitalist system works is, is because we're saying humans are selfish creatures. If you create a structure in which they can just go be selfish, and we get to take advantage of the outcomes of all that selfish behavior. Look at Elon Musk, right, Doing all this incredible stuff that's moving us forward from a technological standpoint, also making him fantastically wealthy, putting him a position where he can control, like, just these armies of people building all this incredible stuff. He can get his agenda done. He can influence politics, all of it. Okay, so cool. There's obviously many people that are going to argue about his level of influence and all that, but the system allowed for somebody like that to pursue their selfish interests, and it kicks off all this technology along the way. The catch becomes, from where I'm sitting, is that when I look at the NIMBYism, there is a point at which so many things have come together where everybody is pushing for only their sole interest, that we begin to bake into the structure of the economic system itself, all these deranging elements. And then it's like, yeah, you can point at housing and you can say, hey, well, it's really in your best interest to do this. But once everybody is acting like that at every level and everybody is solidifying power and voting for things that are good for only them, and then they don't realize they're disenfranchising the young and that there's a historical pattern that says you do not want to disenfranchise the young, as they will completely flip the tables over and they will come for your head. That's where this starts to get problematic. And so getting people to understand that the economy is broken in exactly the way that someone like Mamdani is pointing out he's right. Like, he's got his finger on the right problem, but his solutions are disastrous. And this is one where we'll differ in that you're very sanguine. You see maybe a positive thing coming out of this. And I just look at history and I'm like, this loop has played out so many times and it becomes way dangerous long before anybody learns their lesson, because they're not looking. They don't have a metric that they could say, oh, I'm just going to watch this metric. I'm going to try the policy. I'm going to watch this metric. And we can all agree that's a great metric, right? Yay. And then when that metric doesn't go up, they just end up blaming something else. They don't go, yeah, okay, this policy really just doesn't work. Which is a fascinating part of. I've heard you lament recently about some of the. You didn't say emotional difficulties. I'm putting that phrase in your mouth. But the emotional difficulties of being a political streamer, I'm running into those same things. So for me, I'm butting up against something there. Where I look at this, it feels very dark, feels very dangerous. It feels like there's this thing happening, a slide to the far left that sets off all these alarm bells in my head. And I cannot figure out how to get people to build a vision of the economy from the standpoint of cause and effect. So it's interesting to map out the way that you're looking at it. This is a Red Team moment. We need somebody to run the experiment. Nobody's having serious policy conversations. We're in gridlock. People are sort of doing what they're supposed to be doing, voting for their own interests. And so now this is sort of a natural beat in all of this where somebody comes in to try a new policy that hopefully will break up the distortions that have worked their way into the system. Sure.

[Tom Bilyeu]

To be clear, I don't think this is a Red Team moment. The Red Team I was hoping for is supposed to be the Conservative Party, or at least more conservative people. And I feel like they've completely abandoned the policy discussion. So.

[Stephen Bonnell]

And they would Red Team socialism? What would they.

[Tom Bilyeu]

Red Team or I wouldn't say socialism, but just more, I guess, like further left economic idea stuff.

[Stephen Bonnell]

You want them to.

[Tom Bilyeu]

Because like on a very broad, on a very basic, broad sense, the further left you go, the more price controlly people get. Meaning setting artificial caps on things like saying insulin shouldn't cost this much, it should be set at this price. Or they'll set price, they'll bring up a price floor like the minimum wage should be this high. And the further away your price controls get from market equilibrium, the further your market is distorted. And then other things start to happen to compensate. So for instance, if you bring down the price of insulin too much, maybe companies don't produce it anymore because it's no longer financially worthwhile. Or if you bring up the cost of minimum wage too much, maybe companies start paying more and more employees under the table because it's no longer worth it to employ them, or they just shut down. And then on the flip side, you have generally this was the general case, but again, this has not really been the conservative party for the past five or ten years is usually they fight for more, like free market stuff. So they'll say things like, well, the minimum wage should be lower or the company should be able to act in whatever way they want. And obviously in some ways that's not good. We have rare diseases in the United States, so there's not very much money that you are incentivized to cure, because why would you. But when the government offers incentives with the, there's a name for like this rare drug disease program, but the government kind of offers bounties for curing certain diseases, even though the financial incentive wouldn't be there otherwise. Like, well, that's a good thing. And conservatives would never push for stuff like that. So, yeah, you have to have like, I think these two forces pushing and pulling on each other, and then it just forces you to be a little bit more honest about what your particular policies can do. And then you settle somewhere, not necessarily in the middle. But even if you settle more to one side, at least it's kept more honest by your opposition.

[Stephen Bonnell]

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[Tom Bilyeu]

Learn [e-mail] Explore BCE terms and cash back cap apply. When you manage procurement for multiple facilities, every order matters. But when it's for a hospital, they matter even more. Grainger gets it and knows there's no time for managing multiple suppliers and no room for shipping delays. That's why Grainger offers millions of products in fast, dependable delivery. So you can keep your facility stocked, safe and running smoothly. Call 1-800-GRAINGER Click grainger.com or just stop by Grainger for the ones who get it done.

[Stephen Bonnell]

Thanks for sticking around. Let's get right back into the action. If you had to distill down, what are the two opposing forces? Are they politically opposing forces or something

[Tom Bilyeu]

else between like the right and the left today?

[Stephen Bonnell]

Yeah. I can't tell if in that example you're saying you need the right and the left to be pushing on different parts of how we, you know, move the levers of the economy and they disagree and so they're each pulling on different levers and that just sort of on balance creates something good. If that's what you're saying or if

[Tom Bilyeu]

that's what I'm saying. Yeah. Okay.

[Stephen Bonnell]

So the way that I approach this, I think the fundamental way that people are looking at this stuff is so broken. And nobody in politics understands the economy. Scott Besson does for sure. That guy really understands. But the vast majority of people, the people he needs to convince to be appointed, they don't understand the economy. So you run into a position where the. If a politician's job is to get elected and get re elected, then they have no incentive to actually learn how the economy works. They have an incentive to learn how to make the populace feel about something that they're saying. This is why Imam Donnie is so impressive in that he really understands the pain that people are going through. He can put his finger right on it and he can say a solution that sounds awesome, but when you were sounds awesome from an emotional standpoint, it will make people feel what they want to feel, hope things are going to get better, change all that. Even though it is literally he's approaching people that are dying of thirst and offering them salt water. And so it's just going to be, it's, it's probably worse than that. It's somebody lost in a desert and he's offering them a chance to lick the sun. What are like the worst so bad?

[Tom Bilyeu]

What are the huge, like horrible worries I guess you have economically for things that he would present.

[Stephen Bonnell]

It depends on if you're talking about is he going to get checked, like when he tries to do these. Probably a lot of these things won't go into fruition. And so it'll be sort of this long slow thing. But let's just take the housing putting, rent freezes. The reason that I'm so worried and find myself wanting to push just into, like, absolute hyperbole is because when you play those out down the road, what ends up happening goes like this. The first person gets an office and they promise things that make people feel emotionally good. And you go in, you do those things, you freeze, rinse, whatever. And then, because we've already run this experiment in New York, we know what's going to happen. And that's going to be if you tell somebody who makes a product, which is a product or service which is running that building, you can only charge this amount of rent. The problem is they have taxes, they have upkeep, they have employees, they have to pay all of that. And it can and will get to the point where for the amount that you can, you tell them they can charge, they're not able to pay for the building.

[Tom Bilyeu]

Yeah. So just as a quick thing, like, I don't disagree with any of this. I think rent control is a bad policy. Forget New York. It's been analyzed basically all over the world and it doesn't really work. But we also do it everywhere. So I don't consider that like a massive departure from what's going on. Like California, San Francisco. I think parts of LA have like a lot of rent control and Canada has it. Like the whole world, everybody does rent control. So if he does more, I don't think it's good. But I don't see that as being like a catastrophic, like a step in the darkest direction in the same way that all of Trump's. Yeah.

[Stephen Bonnell]

Let me make my best case. There are three books that I highly encourage people to read to understand just how bad that can go. I would give different books if I were trying to get people to be afraid of Trump and authoritarianism, because that also goes completely pathological. You're. It's, it's pathology on both sides. But here's what I see with this and how wrong it can go. Read Gulag Archipelago, Mao, the Unknown Story and Red Famine, and you very quickly realize that there is a, a thing, a property of the human experience that will trigger every time you try to do this, which is you're gonna put these policies in place. They are not going to work. And because they don't work, people will resist. And when people start resisting, you have to say, what am I going to do when that person resists? In a democratic situation, you go and that you have to convince those people, whether you agree with them or not, they can vote you out of office and everything is fine. But if enough people vote for socialism and they want socialism, then you start marching down the path. Certainly where Europe is going, which we can talk about some of the problems that are being born of that. But right now, you will end up in a situation where you either abandon these, as we did in New York, and then, because in New York, in the 70s and 80s, in the Bronx, I think it was 20% of all buildings that burned were arson, so people could collect the insurance payment because it was cheaper to just burn the building and collect the insurance than to try to get around all the regulations. Okay? So we end up backing out of that by reinstituting capitalism, by reducing the regulatory burden, letting the free market go back and do its thing. But now here we are looping around again. Now maybe America has protections and we'll just always loop. We're always going to be banded. But the thing that worries me is that we really will swing to the socialist side and we will come to the point where we realize people are going to disagree. And the only way to get them to stop disagreeing is to silence them through jail or violence, which obviously has played out over and over and over around the world. Even the UK right now has just become completely unhinged with locking people up politically.

[Tom Bilyeu]

So how do you rate this as an issue? So, like, there's a world where I can hear what you're saying, but I feel like we've already swung so far on the right side with Trump, who controls a much more important office, and it is ubiquitously echoed and resonant throughout the entire right wing federal party, like through the House, through Congress, everything else, and then our whole executive branch that when I look at like a mayor in New York City, I'm like, this doesn't even register, basically.

[Stephen Bonnell]

So you and I have a very different frame of reference. So my frame of reference goes like this. The Republicans are unhinged lunatics when it comes to spending. The second they passed the big beautiful bill, I knew I cannot trust them. They are not going to do the right things to overcome the wealth inequality that will lead this country into open revolution where people are getting killed. So, okay, well, they're not my ally. So then I say, well, is there anybody better? And the only people worse than the Republicans are the Democrats. So that's terrifying. So I have these people who are bad and then these people who are worse. And I mean, we can go through the mechanisms. I'm not sure if we need to, but if we do, I Sort of.

[Tom Bilyeu]

I guess, like, the confusing is I hear this a lot, but then I look at like, so I was promised communism or socialism after eight years of Obama and I never got it. And then I was promised communism or socialism after four years of Biden and then I never got it. And then on the other side, people warned of a whole bunch of horrible stuff that Trump would do and a lot of it or more happened in the first term and then come to the second term, it is continuing to happen. So I just don't understand the fear of like rolling. So I think we talked about this on maybe the first episode. We did. Like, everything that Trump has done is like very predictable. I think that from the first term it was obvious that he won it. He's a crazy spender. He spent a ton when he came into office after Obama. He doesn't care about balancing the budget. He did his huge tax cuts in his first term. He permanent made them permanent in his second term. He's not capable of leading the country. There's a whole bunch of reasons to expect what's happening now because of what happened in the first term. And then meanwhile, on the other side, again, I keep hearing like, socialism and communism are gonna happen under the Democrats. It's like 98% of all jobs made in the past 50 years have come under Democrats. The last balanced budget we had was under a Democrat. Every time a Democrat comes into office, it's on the back of like a Republican led disaster. And it's like, I don't understand how we're voting in Republicans to give them another chance and then they destroy everything again like they've already done because we're too afraid of electing Democrats because we're worried about them doing a thing that they haven't done and don't really show any inclination of doing. It's really hard for me to understand

[Stephen Bonnell]

we might have different things that we worry about. So I don't need them to usher in socialism in name. What I need them to do for them to be a not only moral hazard, but a literal physical hazard for the United States is to deficit spend. So I just rank order the parties by how much they're going to deficit spend.

[Tom Bilyeu]

In that case, the Democrats still easily win. No, no, no, no.

[Stephen Bonnell]

The Republicans add more to the big beautiful bill. If they were saying government is shut down until we balance the budget, I'd be on team Democrat. But they're not. They're saying just add these things back into the bill. That is, again, this is not a. I'm going to bat for Republicans. This is like, what the Republicans are doing is completely unacceptable and will drive us off a cliff. And then the Democrats are like, but wait, let's go faster. That's the part where I'm like, no,

[Tom Bilyeu]

it was because the Republicans did a whole bunch of like tax cuts, increase for funding for ICE and a whole bunch of other stuff like this. And they cut. The way they balanced it was by cutting.

[Stephen Bonnell]

They haven't balanced it foods.

[Tom Bilyeu]

Well, the way that they make this kind of work in the way that they didn't. It really. And it doesn't work. Right.

[Stephen Bonnell]

Yeah, we see this very differently.

[Tom Bilyeu]

But the way that they've balanced anything. When I say balance, the way that they brought back a little bit of the budget by cutting things like SNAP and Medicaid, but I couldn't fucking care

[Stephen Bonnell]

about bringing it back a little like this is. It's deeply problematic. What the Republicans are putting forward is within 10 years you go off a cliff.

[Tom Bilyeu]

Sure.

[Stephen Bonnell]

So now I'm just saying you've got the Democrats going, no, no, no, we can do it in eight. And so now.

[Tom Bilyeu]

But all the big beautiful bill is a Republican bill. Yeah.

[Stephen Bonnell]

What the fuck? So I think. You think I am either identifying as a Republican or I'm going to back.

[Tom Bilyeu]

No, no, no. I'm not thinking that. I'm just. You're saying that the Democrats are worse because they want to reinstate SNAP and Medicaid to bring back the old requirements. But it's like those were things that Americans already had expected. And then the Republicans are cutting them to give dumb tax cuts and other like, bad spending measures. But you're saying since the Democrats want to add these things back, they're worse. But the Democrats would have never passed a thing that looked like the big beautiful bill. So the bill that the Democrats would have passed would have been fiscally better than the big beautiful bill.

[Stephen Bonnell]

If I'm hearing what you're saying, which is I think if we had just elected the Democrats and not the Republicans, then we would be in a better fiscal place. We would be closer to a balanced budget. Given their movements now, I have no reason to believe that that's true.

[Tom Bilyeu]

The easiest reason why I'm 100% correct is because they wouldn't have solidified the Trump tax cuts, which have been one of the biggest things that have pushed us more into debt is having these huge tax cuts, reducing your income without decreasing your spending.

[Stephen Bonnell]

Okay, my take away on that is when I look at Mamdani, that feels to me like that's where the energy is in the party, which is way farther left. It's way more. Give thanks for free. It's way more tax, tax, tax.

[Tom Bilyeu]

Wait, but why? He's just one mayor.

[Stephen Bonnell]

Yeah, yeah, but if you think about. So my base assumption is that he's representative of where the party is going to go. If you believe he's just a random guy, but he's literally just the mayor

[Tom Bilyeu]

of New York City.

[Stephen Bonnell]

But look at how much energy he. How many people in the party are talking about him. Look at the coverage.

[Tom Bilyeu]

The coverage is big. And there's people online talking about him, but most he's not that the reason why. So people are really critical of Hakeem Jeffries and Chuck Schumer for not endorsing him. The reason why is because he's not actually that popular writ large with the Democratic Party.

[Stephen Bonnell]

So listen, it's entirely possible that the rumors aren't true and that part of why Chuck Schumer is holding this up is he's worried about getting primaried by aoc.

[Tom Bilyeu]

Maybe he's probably holding it up because he wants SNAP and Medicaid back for Americans and not just more deficit spending and Republicans that refuse to to do anything.

[Stephen Bonnell]

Well, the deficit spending, that's where your argument weakens. Because they're willing to increase the deficit. They are saying, I care more that people get these things than I care about the deficit. That one thing is where my brain switches on either party. The second a party says I'm willing to deficit spend, what they're actually saying is I'm willing to increase the wealth inequality. I'm willing to make the rich richer and the poor. Poor deficit spending, is that, that, is it mechanistically.

[Tom Bilyeu]

Okay, let me try this. I'm curious how you feel about this. Okay. You and I are in la.

[Stephen Bonnell]

Yep.

[Tom Bilyeu]

Okay. And we have a thousand dollars and we want to take a road trip to Vegas. Okay. And on the road trip to Vegas, I want to be able to buy my 12 pack of red Bull. Okay. This is my Red Bull. We've guaranteed this. Let's say that at some point you bring two more friends. Okay, so we have a thousand dollar budget. We're going to Vegas. I want my Red Bull. And let's say that you're like, actually, I want to take a road trip to Portland. I'm like, portland, that's going to cost like $3,000. And you're like, yeah, we're going to do the Portland thing. And also you don't get any Red Bull. And eventually I'm like, okay, hold on. You got all your friends running against me. All right, we can go to Portland if you want, but I'm keeping my Red Bull.

[Stephen Bonnell]

Yeah.

[Tom Bilyeu]

In that situation where you've increased the cost of our trip from $1,000 to $3,000 and then you've cut my $20 Red Bull for me to say, well, I at least want my Red Bull for you to go, oh, so you want to spend $3,020. You're even worse. Well, that's not true because I wanted to go to Vegas the whole time.

[Stephen Bonnell]

Yep.

[Tom Bilyeu]

For the Democrats would have never solidified those tax cuts, which is the big. Which even under Biden, it was the interest and the additional. Well, the lack of revenue collected that was even pushing a lot of deficit spending under Biden. And now to have those solidified, they would have never been solidified under the Democrats. The budget would have been closer to balanced. It was coming closer to being balanced under Obama and Biden than it was under Trump, who was massively deficit spending more than Biden or, I'm sorry, more than Obama at the end of his term, even though Trump came in under a good economy. I just don't understand how we ever look at them and go, they're worse because they want to fight for SNAP and Medicaid when it's the Republican budget that was so much more dumbly done. That's just crazy to me.

[Stephen Bonnell]

Okay, Fair, but fair in that you're a smart person, you're looking at it, you have a frame of reference. You sound like you're missing a key point from where I'm sitting.

[Tom Bilyeu]

Okay.

[Stephen Bonnell]

And that key point is I don't have to look at hypotheticals. I just need to ask, we're in the situation that we're in and how are they behaving? So your example is great in terms of. I totally get the emotion of like, hold on a second now. The one thing I said I wanted, I'm not even going to get. And we're driving somewhere else, what is happening. And so I am still going to get my thing and I don't care if it costs more money. And so what I'm saying is, even if I can't get you to agree that I think that that analogy is kind to the point of being nonsensical. But even if I can't get you to agree to that, that's the surface. What I am literally kept awake by is the fact that the entire nation is arguing up here. What my wife and I call never talk about the Tea So the biggest argument I've ever been in with my wife was over a cup of tea. And after two hours of screaming at each other, almost ruining an entire vacation, I was like, there's no way I'm this mad about a cup of tea. So what am I actually mad about? Then I got into the like building blocks of what was actually going on. We started talking about that, which had everything to do with insecurities. And all of a sudden we were able to resolve the issue.

[Tom Bilyeu]

Issue.

[Stephen Bonnell]

What I'm saying is all the stuff that manifests up here at like, we've got to give this to that person. And I want my Red Bull, is everybody needs to get on board with it, is a. The government has a moral obligation to balance the budget. So I have all of these base assumptions in my brain that run that paint my worldview. One of them is when you look back in history, every time, minus Japan, every time a country has spent more than 18 months at over 130% debt to GDP, they've gone into open violence. So revolution, civil war, or just default, which leaves people starving in the streets. So it's happened every time, except once again, Japan being the only exception. And we're at 122% and growing rapidly. We add a trillion dollars to the budget, so you can look at a spreadsheet, and it really is. It's somewhere between seven and 10 years from now, barring some miracle, we cross that 130% mark. And given that we are already at each other's throats, like, this all breaks. So I'm just like, any step in that direction, and I'm just like, this is crazy.

[Tom Bilyeu]

Sure, I can kind of understand what you're saying. So in my analogy, right? Well, it's $3,000. It's a lot for that trip, but like $20, that's even more money.

[Stephen Bonnell]

And by the way, I'm screaming at why the fuck. What are we.

[Tom Bilyeu]

We.

[Stephen Bonnell]

How are we already doing a $3,000 trip?

[Tom Bilyeu]

Sure, I understand. I guess my question then is, do you acknowledge, would you say then that had Kamala been elected, if there was a Democrat Congress, we would have been closer to a balanced budget than we got under the one big beautiful bill.

[Stephen Bonnell]

It is a hypothetical rerun that I have a natural inclination to say no.

[Tom Bilyeu]

Even all the history disagrees. All the history points to Democrats.

[Stephen Bonnell]

Walk you through the beats. Because, dude, honestly, I'll give a 30 second pitch about why I don't care, Republican or Democrat, okay, I really believe this country is going to default. On its debt. And that will end America for 100 years. In terms of anything that people think of as America being important on the world stage, having a stable economy, being a place where people are safe, that goes away for 100 years. It's just the normal cycle of this stuff. Even China had their hundred years of humiliation. Look at what happened to Argentina. Same thing. It took 100 years. They're still not back yet. Maybe they'll make it, maybe they won't. But it's like when. When a country defaults, it is so catastrophic, it doesn't sound scary, but it's like, terrifying because you become uninvestable. And so now the part of debt that's useful goes away and you can't raise it. And so your country just gets stuck. And it. That is a nightmare scenario the likes of which I really don't want to live through. And then if it's some lesser version of that, there's still going to be some untold number of people that get murdered in the streets. It just plays out over and over and over.

[Tom Bilyeu]

I don't disagree with a single thing you've said so far. Perfect.

[Stephen Bonnell]

So now it's like, okay, when I look at if. If everything driving my thinking is economic, I'm going to look at the candidate that seems to have a better grasp of economics.

[Tom Bilyeu]

Okay.

[Stephen Bonnell]

And I don't expect you and I to agree on this, but Kamala Harris completely ruled herself out when she started saying words like what Mamdani is saying. He's more crystallized, he's farther down the road. But she was talking about the same thing, price controls and things like that. And for me, when somebody says that, it's just a disqualifying statement.

[Tom Bilyeu]

Now, what do you think? Because Trump has said so many more things.

[Stephen Bonnell]

More, we're never going to agree on that.

[Tom Bilyeu]

Well, no, but there are some things that you would just be objectively, factually incorrect on. So, for instance, if you're worried about socialism, how do you feel about the fact that Trump now with the United States is getting shares, The United States government is getting shares in, like, intel or US Still Nippon Steel, like, that's like a social. That's like an AOC Bernie Sanders wet dream. Oh, the government has, like, shares, voting shares or whatever.

[Stephen Bonnell]

Capital letters. Moronic.

[Tom Bilyeu]

Yeah, but a Democrat would have never done that. So this came from Trump. Right. And then when we look at things in terms of, like, catastrophic impact on the economy, nothing that Kamala said and Democrats say a lot of dumb things is the equivalent to the Tariff regime that we have right now that is continuing to. Our currency devalued 10% over the past year.

[Stephen Bonnell]

Our trade relations very complicated. You have to devalue the dollar. There is no way out of this devaluing the dollar. You have to generate more tax revenue. Tariffs are a tax. Look, Trump is bordering on indefensible.

[Tom Bilyeu]

So you're not even. What you just said doesn't make sense. Because if you're trying to generate more tax with a tariff, why can't you just raise income taxes? Wouldn't that be so much easier and it wouldn't hurt our trade relations with the rest of the world or because bumping up your income tax by a few points in every bracket is going to raise you hundreds and hundreds of billions of dollars. The easiest way to raise a ton of money. But the import tax is damaging. It's destro relationship with so many other countries around the world and it's hurting our domestic economy and it's having disproportionate impacts on the people that probably need the money the most.

[Stephen Bonnell]

I think this is going to have to play out before we know if it's helping us on an international stage or hurting us. I honestly don't know.

[Tom Bilyeu]

Okay, we have got zero deals in however many days. We said we would have 90 deals in 90 days. We have none so far.

[Stephen Bonnell]

Well, that's not true. We do have deals.

[Tom Bilyeu]

We don't trade deals. Real trade deals. No, we've got some truth.

[Stephen Bonnell]

Fine. Real.

[Tom Bilyeu]

A trade deal would be like a market wide deal that dictates different terms across the different sectors of your economy. Like these are usually hundreds of pages, pages long that it's not like we'll tariff you 10% and you tariff us 10%. Because there's a lot of. There's like markets are sophisticated things depending on how you run it. Like let's say that oh, I buy milk from you and I also sell milk to you and you're like, okay, cool. And in our economy we also have a thing where if you produce milk, you pay 0% taxes. Well, that's not like a tariff. But that's a pretty bullshit advantage that you guys have. That's not really fair. These are the types of minutia that you get into when it comes to actually writing a real trade deal. It's not just saying like, oh, blanket tariffs.

[Stephen Bonnell]

Taking a short break. But there's more impact theory after. Stay tuned.

[Tom Bilyeu]

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[Stephen Bonnell]

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[Tom Bilyeu]

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[Stephen Bonnell]

Nine out of the ten largest banks get it. They get the Advantagescore. The Modern Credit score is the leader in predictive power, improving mortgage default predictions and saving lenders billions better predictions better for your business with VantageScore. Thanks for staying tuned. Now let's get back to it. But are you saying that leading into this that things were going well?

[Tom Bilyeu]

Yes, phenomenally.

[Stephen Bonnell]

Donald Trump is fucking that up.

[Tom Bilyeu]

Yes, absolutely.

[Stephen Bonnell]

So we've at least now identified the base assumption that we do not share. Okay, so I'm looking at the international trade deals that we have and I'm like, I cannot believe we have allowed this to happen. We are now in Thucydides trap. We let China grow powerful because we were idiots Markets and this is a tale as old as time we could have, and I'm sure there was somebody that's been screaming about it from day one, predicted that this is exactly what was going to happen, which we let happen.

[Tom Bilyeu]

Wait, what was the bad thing that was going to happen?

[Stephen Bonnell]

That we have now completely gutted manufacturing out of America, but the manufacturing is

[Tom Bilyeu]

at the highest point it's ever been. It was at Biden. It was the highest point it's ever been. We've exported a lot of low level manufacturing, but we don't have people to manufacture everything. Like China is not trying to expand their low level manufacturing. China's trying to grow into the manufacturing that we do.

[Stephen Bonnell]

Yeah. Let me give you an alternate version of this is what I think actually happened. China admits this is what happened. The VCs are finally talking about this is what happened. It's the 80s and China is backwards. Deng Xiaoping comes into power, realizes Mao was killing people en masse, and is basically like, thank God he's dead. We're not going to repeat those mistakes. We're actually going to let people get rich. But we don't know how to let people get rich. They ring ring America, can you please teach us how to be rich? We go over there. In fact, first it starts with a conversation, I believe with the Japanese. Japanese give them indications about how they're gonna have to do this by decentralizing banking. They contact America, America goes over and basically helps them get all of the capitalist system up and running. How? You need to decentralize who gets loans. You need thousands of banks, not a single bank. You need a VC environment. And so literally American VCs fly over there, of course, selfishly thinking that they're going to reap all these benefits. They get all of these companies to go over to begin teaching them. Deng Xiaoping has an official policy to bide your time and never take the lead. And he's like, this is a part of this long plan. We're eventually going to take over, but first we've got to like get all this information. And so we realized, oh my God, we can get everything cheap by sending our manufacturing over there. But China's playing a different game. And they're like, we're going to start with those things, but we're going to get them to send their best and their brightest. Look at what they did with Tesla. And they say, hey Elon, we're going to let you build a Tesla factory over here. Normally we would force you to have 50 to 51% Chinese ownership. We're going to let you keep the whole thing. But you're going to teach our engineers. Tesla now, over whatever 10 years, 12 years that they've been manufacturing in China is now some tiny fraction of the EV market when it used to be 100%. And they have just learned everything they needed from him and now have surpassed him, you know, however much massively. And so that's the game that they've been running. And Tim Cook said, I don't know, a couple months ago he was like, I don't know what you guys think manufacturing is in China, but these are the best high end manufacturers. If you run the stats of America Post World War I, leading into World War II, we were the dominant manufacturing power for an industrial age economy we have now. And that's by the way, why the probably apocryphal quote that the Japanese admiral said said when he bombed Pearl Harbor, I fear all we did was wake a sleeping giant and filled him with a terrible resolve. What he was referring to is that America could just outproduce everybody in terms of ships, tanks, aircraft, everything. And so we just turned all that machinery on to building the war apparatus. Now flash forward, we're headed into the same style conflict with China, except China looks like us in terms of all the meaningful manufacturing like we did before World War II. So now if we go into a head on collision with China, we will not be able to come anywhere near their production levels. So now it's like, I get it.

[Tom Bilyeu]

How would we ever expect a country of 330 million people to be able to outproduce a country of what is China? 1.7 billion people. I don't know how many, of course. How?

[Stephen Bonnell]

By keeping these things yourself, making sure that you don't let go of them. Building the incentive system to keep people focused on manufacturing, high end manufacturing, the same way that we're doing with AI, with massive investments.

[Tom Bilyeu]

But I'm saying where are you going to get if you want us to continue the high end manufacturing we do now, what are we taking from to start doing low end manufacturing again?

[Stephen Bonnell]

What do you mean? From a budget perspective?

[Tom Bilyeu]

No, from a human capital perspective, our unemployment is like four and a half percent. Where are we getting all the people to do the low end manufacturing? We have to move people from high productivity jobs down to lower productivity jobs. We're going to have to start to give in some.

[Stephen Bonnell]

I reject that wholeheartedly. So right now we have, it's like 4% unemployment, technically 3.8, something like that. But once you factor in all the people that have just checked out of the job market, it's like 12%. So it's a massive number that for some reason nobody talks about.

[Tom Bilyeu]

So the reason why people don't talk about it is because we have. So there's different ways to measure unemployment. The most common way is just called the unemployment number. It doesn't include discouraged workers. This is the U3 unemployment number. You're talking about the U6. People like to bring up the U6 when they say the U3 is fake. The reason why the U6 unemployment isn't the thing that economists look at the most is because there's a lot of reasons why people might stop looking for work. They might be in education, they might be at home, they might be sick.

[Stephen Bonnell]

Totally agree. But I would put forward the biggest one right now. Certainly the most meaningful and important is that there is a type of person for whom a certain type of manufacturing job is the jam. And those have gone away. We've shipped something like 2 million jobs overseas in, in that core type of manufacturing job. And the stats anyway show that that is the biggest reason that your average worker has been unable to up their wages. It hasn't been the breaking of the unions. That's not correlated in the private markets to increase wages basically at all. And so. But if you have a bunch of Jobs that need a bunch of workers now all of a sudden the workers have the power to actually negotiate better salaries. Now if we need to bring in labor, like I think the whole world, the whole developed world is about to be in a really weird position where we just don't have the birth rates. And so we are going to have to bring in immigrants to fill these roles. So having a sensible policy about how we fill in those gaps I don't think would have been a problem at all. I think we took a suicidal approach to it. But there would have been a smart approach to get people in. If there were jobs that truly Americans, they had all the manufacturing jobs they could eat, then I think we'd be fine.

[Tom Bilyeu]

So then just as a. So then your assumptions are that one, if we were to bring back a whole sector of manufacturing, we wouldn't have to take from anywhere because there's this, there's like a magical section of people that would be able to work these jobs that wouldn't take, you say wouldn't

[Stephen Bonnell]

have to take from anyone.

[Tom Bilyeu]

You mean people as in you wouldn't have to move people out of higher productivity jobs to lower productivity.

[Stephen Bonnell]

I think you're gonna have to do high to low certainly as the things change. But you might have to as technology advances, but you might have to import people. I'm perfectly fine with that.

[Tom Bilyeu]

Okay, so then, so that's the first thing. And the second thing is, so then I'm just curious how I don't know the population of China. It's one point something billion. Call it 1.4. Okay. How would you expect us to be able to out manufacture a country that's like five times our population comes down

[Stephen Bonnell]

to where you're putting your resources. So China was way bigger than us and we were still out producing them because they didn' have years of being supported by the international banking community trying to spin them up. They didn't have people going over there and helping them to do everything our way. We did not see them as a competitor. And so we essentially traded cheap goods to build our biggest competitors.

[Tom Bilyeu]

But eventually they're going to figure it out. Like how are you keeping China from like is the assumption that they'll.

[Stephen Bonnell]

I don't think you can. I think on a long enough timeline you're going to find yourself in that situation. I'm just saying don't be in a situation where they are both stronger than you based on size and stronger than you because you have outsourced your entire way of life to make sure that those prices Come down.

[Tom Bilyeu]

Well, then it feels to me then like if we know that we can't win on mass production like that, that our goal would be to produce, to have higher and higher productivity jobs. American workers, some of the most productive in the world, where economically productivity is measured for how much a labor hour costs or in one hour, how much labor, like stuff can you produce, basically. Right. So it feels like the goal then would be to move to higher and higher productivity jobs. So when we look at like, what are the big things that people talk about right now, it's stuff like AI or stuff in computing. And these are the areas that America is still the leader on.

[Stephen Bonnell]

Do you steer by efficiency? Like, as you try to map this stuff out in your head?

[Tom Bilyeu]

What do you mean efficiency?

[Stephen Bonnell]

Are you thinking along the lines of it is an obvious north star to steer by whoever is better at this thing. So Americans are better at getting high output per hour work, therefore we should focus on that.

[Tom Bilyeu]

Oh, kind of. Well, the economic concept you're talking about is called comparative advantage, Right?

[Stephen Bonnell]

Yes.

[Tom Bilyeu]

The. I'm just looking. When I just, I look at productivity broadly because productivity can tell you the amount basically of like.

[Stephen Bonnell]

But is that your star? Just so we don't talk past each other a bit.

[Tom Bilyeu]

A bit, yeah. Because the more product, the more productive your labor is, the more your workers are able to produce for the world, given the amount of time. Okay, Right.

[Stephen Bonnell]

Totally different North Star which was.

[Tom Bilyeu]

Yeah. What's that?

[Stephen Bonnell]

Explain. So my North Star is round it to national security and international dominance.

[Tom Bilyeu]

Yeah, but national security is your most productive stuff. Like, what was one of the big, like one of the big reasons why we won World War II is because we had all of the best and brightest minds and we were the first people in the entire world to research the, you know, atomic bombs for people that are fact checking. Sure. But like I'm saying, like, we got technologically there before anybody else.

[Stephen Bonnell]

Yes. That helped us with Japan tremendously for sure. But the real story of World War II is we were able to manufacture like two thirds of every bit of equipment that was being sent over to Europe. So they were in our debt massively. We were able to aggregate all of the gold and we were able to build our own military up at some ungodly level, higher than everybody else, and we weren't getting bombed. So at the end of the war, now we're. We have the gold, we have the manufacturing capabilities, we've got our GIs returning home, getting educated. We have a massive baby boom. Right. So there's all These things that go into that moment. But the, the linchpin, the one thing if you were like, if you knock that peg out, everything is different is our ability to manufacture the thing that mattered in that moment because that was

[Tom Bilyeu]

like the most productive thing to work on at the time. But I think as technology has moved further and further into the future, other things become necessarily.

[Stephen Bonnell]

Yeah, I might be able to agree on that. Like if we end up saying the most productive thing that we could be manufacturing right now or everything that we need for our modern way of life, technology and war with China, then I would say yes.

[Tom Bilyeu]

Okay. I just, I feel like those wars aren't going to be won by who can make the most ships. I feel like those wars are going to be won by who figures out like the best missile defense systems that's

[Stephen Bonnell]

going to be part of it. But all of this stuff is cat and mouse game. So if what we find is, hey, we're the software kings of the world, we're better at AI and so we assume that this is going to be war played on the AI battlefield, we're ready for it. They can't with us. Well, then they go, oh, but they're not ready for drones because we have the entire drone supply chain. And so we're just going to swarm them with drones. And so, yeah, like they're going to fight back with AI and that's going to be devastating for us. But we're just going to keep droning them.

[Tom Bilyeu]

Sure. But then what do you think is easier to switch tactics for? For us to start manufacturing rudimentary drones or for them to start manufacturing complex AI related stuff, software related stuff?

[Stephen Bonnell]

Nobody's standing still. We're not standing still on drones and they're not standing still on AI so sure.

[Tom Bilyeu]

But everybody, I'm just saying that when you look at the world, everybody wants to be like what the US Is. Nobody wants to be like what you're advocating. The US becomes like the people that we exported our supply chains to. They want to be more like America.

[Stephen Bonnell]

They're not thinking we exported our supply chain to China. And China has no interest in being.

[Tom Bilyeu]

Absolutely. What do you. They're making huge investments in green energy. They're trying to make bigger investments, investments into their microprocessor technologies.

[Stephen Bonnell]

Can you think of as America?

[Tom Bilyeu]

The higher productivity, more specialized labor stock.

[Stephen Bonnell]

So when you say more like America, you mean highly specialized, Highly specialized labor

[Tom Bilyeu]

producing like end of, like supply chain levels of goods?

[Stephen Bonnell]

Okay, that makes sense in terms of just being economically efficient. But I don't See how that collides with the argument in this moment that doesn't in any way shape or form alleviate the need for America to protect itself, for America to be economically strong, to make sure that workers are able to negotiate their pay better, to make sure that we have jobs that fit a massive bolus of a certain type of person that we have that right now has just checked out of the job market.

[Tom Bilyeu]

Right? Yeah. I don't know if I would destroy my country to try to bring back old jobs because there's some sector of the economy that.

[Stephen Bonnell]

What's the part that would destroy it

[Tom Bilyeu]

is regressing in terms of the types of goods that we manufacture. As in saying, like, I don't like the fact that we're making the X87. Why should the F35 plane? Because we should be making more aluminum widgets. So we need to take a little bit away. But in your mind you're trying.

[Stephen Bonnell]

Do you think I'm saying that? I don't.

[Tom Bilyeu]

But one of the frustrating things when it comes to economics is people only ever talk about one side of an equation.

[Stephen Bonnell]

I can talk about this whole thing top, bottom, you can go anywhere where you think I'm weak and we can talk.

[Tom Bilyeu]

Well, but the problem is you've fictitiously invented this huge working group of people that can move into a job with no other negative benefits. So what I'm saying is that like, for the manufacturing stuff, you are going to destroy higher productivity. You're destroying more advanced stages of your manufacturing sector. If you want to bring back base manufacturing, that's an inescapable truth. Reality.

[Stephen Bonnell]

Okay, so that is perceived as false by me. So let's walk through and see if it really is false.

[Tom Bilyeu]

Sure.

[Stephen Bonnell]

So base assumption number one for me is that there are very capable, almost exclusively men of prime working age right now, to the tune of like 8%, something like that. It's very close to 8, if not exactly 8, that are capable but have checked out of the labor market.

[Tom Bilyeu]

Sure. That's our first. That's probably maybe our fundamental big disagreement. I don't think that that's necessarily the case.

[Stephen Bonnell]

Meaning that stat isn't real.

[Tom Bilyeu]

I don't think so. I haven't heard that.

[Stephen Bonnell]

Okay, let's just. So we don't bog down. If it were true, does that puzzle piece click and now my entire argument makes sense to you and at least has internal logic. Though if it.

[Tom Bilyeu]

If it was true, then I think looking for work for them might be good. But then the second issue, that's even assuming that Was true, which I don't think it is. But that's the second issue that I have is on that road, whatever manufacturing we were to bring back to the United States would leave those people still in the exact same spot.

[Stephen Bonnell]

That's very possible. So now the thing that drives what manufacturing that I'm trying to bring back and maybe it's just aspirational to get these guys back into jobs. And maybe once we really look at the kind of things that I'm saying we need to bring back, because I'm not saying saying start making widgets, maybe we find, Sorry man. Like between AI robotics and just how high tech it is just not going to be these guys. And they're still LOL or sol. Yeah, very possible. So we'll set that aside. They're a big cloud of maybe.

[Tom Bilyeu]

Okay.

[Stephen Bonnell]

But the thing that's driving me saying we need to get those, we need to get jobs for them back is that's how you get them negotiating power again, workers to have negotiating power to drive their rates up, which for me as part of my Northstar are, it is an absolute must because you need a thriving middle class. And right now if there's, if you can send jobs wherever you want or import people cheaply from wherever you want, workers will never have the power that they need to be able to negotiate higher salaries. So that's just like to avoid having my head lopped off as a rich person, I know I need to do that. So that's, that's like not even just a moral good that has to happen. Like if you don't do that, you have destabilized capitalism to the point where it will break. It's broken many times in history for this exact reason. So I guess.

[Tom Bilyeu]

So like the sanity check that I would have here is, do you feel like this is an area that we're at right now in the United States where we've done a lot of damage to our middle class or something?

[Stephen Bonnell]

A thousand percent. It's, it's mathematically showable.

[Tom Bilyeu]

Okay, so then my question is, is what other countries middle class do you think is doing better than ours?

[Stephen Bonnell]

China.

[Tom Bilyeu]

That I just completely and totally fundamentally disagree with that.

[Stephen Bonnell]

You don't think China increasing their wages went up 30x in the same period that Americans stagnated from the 70s until now they've had a 30x increase in worker salary. Ours have stagnated.

[Tom Bilyeu]

My son grew a hundred times more than I did in the past 10 years of his life because he went from 4 to 14 and I probably haven't grown at all since perfect China. China's people are approaching their wages have grown more but that's to become getting more in line with the United States.

[Stephen Bonnell]

Yeah. Do you think that does to the psychology of a nation? Do you think that it makes them sad that they've grown that fast?

[Tom Bilyeu]

No, but they're playing catch up to us.

[Stephen Bonnell]

But they feel awesome, right?

[Tom Bilyeu]

Yeah, but they're still behind us.

[Stephen Bonnell]

What is the psychology of a nation that stays flat for 40 years?

[Tom Bilyeu]

I don't know if I would say we've stayed flat.

[Stephen Bonnell]

We have stayed flat. It's just math.

[Tom Bilyeu]

In what regard?

[Stephen Bonnell]

Salary, real salaries versus cost of living has just root. It's flatlined. In fact cost of living compared to what people are making is going to up.

[Tom Bilyeu]

So I think that's, there's a whole separate conversation you could have on that.

[Stephen Bonnell]

Why do you think people feel like they can't make ends meet if everything is great?

[Tom Bilyeu]

Well, I'm not a politician so I would say it's because the American consumer is incredibly spoiled and has no idea what the standards of living are across the rest of the world and is constantly lied to by their own politicians about what other people are living like in the rest of the world. The reality, the number reality is the American consumer is the strongest consumer on the planet. And other people, people would kill to have the horrendous standards of living. Our homes are massively larger. We have the latest in cutting edge technology. When it comes to healthcare, we invent like all of the coolest stuff here. We're not caught in these weird manufacturing traps like Germany is and our immigrants, even our illegal immigrants are all at work. And in other countries they're having legal immigrants that can't find work. Their unemployments are higher, their inflations are worse. Like every part of their stuff is like not running as every other country on the planet. It wants to be like the United States of America and the US consumer. The only reason we can even have these trade deficits we have is because the American consumer has so much power. And there are arguments you can make around cost of living, everything else but depending on how you factor it. And it's a whole separate conversation. But for instance, you could say oh, the amount that you would spend on a console today is flatline. It's the same you would spend on a console 20 years ago. And that's true. But you could buy a PS5 today and in the past you could buy a PS1. So even if technically the cost is the same or is flatlined in terms of real wages, you're getting a lot more for it. Same arguments can be made about stuff like healthcare. Even if healthcare costs are fairly high, a type 1 diabetic 100 years ago is dying in two years, whereas today it might be expensive or even more expensive because of the things they have to pay. So, like, oh, my God, the cost has gone up, but it's also because, well, now they live normal lives almost. So it's hard to measure that directly. But when I'm doing sanity checks on this, I'm just looking at other countries. You mentioned China's growth. Part of China's growth has been their liberalization of their economy, foreign direct investment. The only reason China can even afford to grow, grow is because we have so much money here, we have so much investment here. And we've grown also as a result of our relationship with China. And China's trying to race towards what the United States is right now. And I think it's an interesting as a sanity check, like, why, if China's racing towards to get to where we are, why do we want to go back to where they're coming from?

[Stephen Bonnell]

We don't. And so I think the strategy that Trump right now is running is a be more China than China. I think that that is suicidal. Okay. There were a lot of things laid out, and I want to see if we can start putting some of these pieces together. So, first of all, you put out the idea that if Americans knew how good they had it, that they wouldn't be as feeling bad about where they are as they are a little.

[Tom Bilyeu]

Yeah. And just in qualifying that we should always push for better stuff. I think that's great. But there are some Americans who think that, like, in Europe, they have free health care and free everything else, and they pay no. Like, they think everything is so much better. Better. And it's not really the case.

[Stephen Bonnell]

You and I agree aggressively. And Lord knows I wish that that felt like a winning battle. But convincing Americans that they really do have a good. I don't. It just doesn't line up with what I know about human psychology. So the Ginny coefficient makes it very clear. The studies with monkeys make it very clear. If people look around and see somebody else and they have a perception that that person is being treated better than they are, they are going to lose their.

[Tom Bilyeu]

Agreed.

[Stephen Bonnell]

And right now, now, because of a very quantifiable economic problem, we've put young people in a position where they are buried under student debt, largely at a time where the government pie really is shrinking because the interest payments are growing and just gobbling everything up. It's more than defense. It's the third largest expense that we have in the government, and it's growing. It will become the second largest expense almost certainly before the end of 2025. So this is happening very fast. So your interest payments will, in the next couple of months, almost certainly pass Medicare or Medicaid as the second highest expense in the government. So it's like that's creating this insane distortion in terms of what they can afford and what they can't afford, because the way that the government makes up for that shortfall is with money printing. Money printing is inflation. They're not related. They are the same phenomenon.

[Tom Bilyeu]

Not.

[Stephen Bonnell]

And so things are becoming more expensive precisely because the government is deficit spending. And so as long as they deficit spend, they are making things more expensive for people by taxing everybody. But the only way to hide from the taxation that is inflation is to own assets. Okay, well, great. Anybody can own assets, right? The bad news is only 10% of Americans own 93% of the assets. And I'm going to guess that follows another power distribution. And of the 10%, I'm sure that 80% are 20% of the people. And so you're going to have some ridiculously small number that own all of the assets in America effectively. And then everybody else just gets absolutely hosed by inflation. And then they wonder, why can't I make ends meet now? When we did this in the 70s, we at least had women that could go into the workforce and start making money. And so houses, household incomes could rise back up and match it. And cool. We were fine for another couple of decades. Decades. But we're now at the point where there's just. There's no that thing left anymore. There's no other person to put into the workforce. So I really think, despite that, I agree with you very wholeheartedly that people are in a position where they really do have a good. Poor people in America have it way better than people in other countries. However, it really is that things are getting more expensive. They really can't afford it. And the only asset they understand intuitively is a house. And houses are just completely out of reach because of inflation. And so now because of deficit spending, they can't buy a house, they can't get out from under their debt, and they can't afford things. And so I'm not confused when they're like, hey, I really want to be a socialist. And I'm just saying the bad news Is though, that will speed this problem up now. Sure.

[Tom Bilyeu]

So I, I understand what you've said. I feel like there's a couple things that are difficult to. To understand Understand, though. 1. So, like, one thing you said that deficit spending was bad because it makes things cost more. But then I feel like earlier you said one of the big things is we have to devalue the currency. Yeah. So when printing more money, devaluing the currency, wouldn't this, like, play into the same thing when you want that?

[Stephen Bonnell]

If I say you should never hit a woman and then a woman rushes into the room and is hitting your child with a baseball bat. Beat the out of that chick.

[Tom Bilyeu]

Okay.

[Stephen Bonnell]

So I'm just saying we're in a position where things are so bad. Bad. There are four levers that you have to pull. All of them are bad, but you have to pull all of them. You have to forgive some loans. Okay. That just means wiping it.

[Tom Bilyeu]

So then the inflation stuff, you think isn't necessarily that big of a deal right now because we need to devalue our currency.

[Stephen Bonnell]

No. The inflation is horrible and I'm going to make it even worse. But the only way to get out of this predicament is to use deflationary and inflationary levers. We have four of them. Two are deflationary, two are inflationary. And we're going to try to. Oh, God. Get it just Right.

[Tom Bilyeu]

Right.

[Stephen Bonnell]

And get it to the point where the people that we're stealing from by eliminating their. Because when one person owes debt, that's somebody else's liability. Sorry, somebody else's asset. And so as you wipe out one person's liability, you wipe out their asset. And so they just lost money that they work for and it's just gone. And you just. All you have for them is a. Sorry. That's just where we're at. So you're going to do some of that. You try not to do so much that those people openly revolt. You're going to have to do some money printing because you have to devalue the debt itself in order to get out of this. You're going to have to tax the wealthy more. There's just no way around that because you got to generate some additional funds somewhere and then you have to go into austerity, but not so much that you freeze up the economy. Ray Dalio details exactly how to do it. It's called beautiful deleveraging. No one's ever going to do it. Those are your levers.

[Tom Bilyeu]

Okay. So I guess, yeah. And understanding this, and we don't have to retread too much of this. I want to circle the drain on the. But I just. When I feel like I look at all of Trump's major economic policies, all of them just make everything you said worse. That's what I feel like. So you talk about, like, Gini coefficient inequality, like, so out of this, your

[Stephen Bonnell]

goal would be to convince me we're in a tough spot, Tom. But you're. You're just better off with the Democrats.

[Tom Bilyeu]

One trillion percent.

[Stephen Bonnell]

Got it.

[Tom Bilyeu]

The reason being that there are so. There are two huge things that are easy moneymakers and really fast.

[Stephen Bonnell]

Just so I can up to this. The reason that you want to talk about that, which I find mildly interesting, but not super interesting, is because we live in a political world, we are going to have to elect somebody. And so let's just focus on who the somebody is a little bit.

[Tom Bilyeu]

Yeah. But it's also secondarily played into a thing where, like, somebody is telling you, you know, I really, really love. I love sweet foods. I love sweet foods. They're my favorite. And I'm like, oh, yeah, me too. Here's a candy bar. And then they dump, like, a bunch of salt in their mouth. And I'm, like, very confused. I'm like, I feel like something is not matching up. So, like, I hear you give a lot of, like, baseline stuff. Stuff. And I'm like, that sounds good. I think I agree with that. But then the prescriptions have been, like, wildly different in terms of my mind. So two easy ways to make money that the Democrats were doing is, one is funding your irs. You have to be able to collect the tax revenue that's owed to you. And the money we're saving here is on the scale of hundreds of billions of dollars for what the IRS itself has said is out there for monies that they could get. I think $600 billion is the last number I saw. So that's the first thing Biden expanded. Was it 80,000 agents or something? And then Trump has now peeled that back. So that's one way to do it. And then the second way is income taxes are just such a nice and easy way to collect money. Everybody has a job. Generally, people have jobs. The money is taken to your paycheck. It's super easy to administer. It's very easy to collect, and it's very easy to kind of like, target different people with different tax rates. Tariffs are, like, the messiest, worst way to absolutely fuck over somebody who has to buy certain goods that is more important to them. Like, it's a consumption tax, basically, but it's a consumption that's probably disproportionately hurting poorer people. So when I look at Trump, we're making some money now through tariffs, which I would argue are also doing external damage, but forget it. Just looking at the consumer. So terrorists are probably one of the worst ways to tax the United States. And then he expanded the tax cuts, which is severely decreasing our government revenue. And then he peeled back all of our IRS collections because they hate it. And then to satiate our debt woes, we got Doge, which went from saving 2 trillion to maybe 9 billion, if that, that. And it's like everything I've seen Trump do is horrible. Kamala wouldn't have solidified the tax cuts, which would have helped a lot on the revenue side of things. They would have maintained the hiring of the IRS agents so we can enforce the tax codes on the books, which is good. And then we wouldn't be doing this weird tariff thing so we could negotiate better trade deals if we wanted to, while we would at least continue to have the poorest people be able to afford the things that they want without disproportionately taxing them to try to make up for some new thing that she wants. Wouldn't have continued, which was the Trump. The Tax Cuts and Jobs Act. Those are the big things that I see. And it just feels like all of them playing totally opposite directions from the Democrats and the Republicans.

[Stephen Bonnell]

Yeah, that's it for part one. Make sure you are subscribed so you do not miss part two. Coming up soon.