Economic and Political Insights

The Myth of Small Donors in American Politics

David Bernstein — Mon, 20 Jul 2026 21:22:25 GMT

For years, the American progressive movement has sold a beautiful, cinematic fairy tale about how modern politics works. In this narrative, there are the pure-hearted grassroots crusaders, funded entirely by a virtuous army of small-dollar donors giving $27 at a time. On the other side stand the dark forces of corporate interests and outside lobbying groups, subverting democracy with unholy mountains of cash.

It is a compelling story. It is also completely fake.

A fascinating piece in Tablet Magazine detailing the rise of “American Priorities”—a massive new pro-Palestine Super PAC—has officially blown this narrative to pieces. The group, which pledged to dump over $10 million into the 2026 midterm cycle to back anti-Israel candidates and unseat incumbents, isn’t being funded by bake sales or campus lunch-money donations. It is backed by deep-pocketed Silicon Valley multi-millionaires, specifically former executives from the tech and mobile advertising giant AppLovin, alongside other elite tech founders.

The arrival of American Priorities exposes a series of uncomfortable truths that the political left has spent a decade trying to hide.

1. The Small-Donor Myth Is Dead

First, let’s discard the romantic illusion that any serious political faction operates solely on grassroots pocket change. The “small-donor” narrative has always been more of a marketing strategy than a financial reality. Building a national political infrastructure, buying airtime, running sophisticated digital operations, and mounting primary challenges against entrenched incumbents requires serious, heavy-duty capital.

When progressives need to scale up their operations to compete at the highest levels, they don’t just rely on recurring monthly donations from college students. They do exactly what everyone else does: they court wealthy tech executives, venture capitalists, and elite mega-donors who can write six- and seven-figure checks to supercharge a PAC. The AppLovin-backed influx of cash proves that big money is not a partisan vice; it is the baseline currency of modern political warfare.

2. The Progressive Double Standard

This brings us to the staggering hypocrisy of the progressive establishment. For cycles on end, progressive candidates and organizations like Justice Democrats have treated outside political spending as an absolute moral failure. They have scolded rivals, demanded pledges to reject corporate PAC money, and framed any campaign benefiting from independent expenditure groups as inherently corrupt.

Yet, as the Tablet piece illustrates, when a well-funded Super PAC like American Priorities steps in to spend $1 million in North Carolina or drop $2 million in New Jersey to advance an anti-Israel, progressive agenda, the moral outrage mysteriously evaporates. Suddenly, the nuances of campaign finance become highly acceptable. Candidates claim “no involvement” with the PAC while reaping the massive benefits of its ad buys and ground games. The left’s grievance with big money, it turns out, was never actually about the presence of money in politics—it was entirely about who the money was being used to support.

3. The Selective Vilification of AIPAC

Nowhere is this hypocrisy more glaring—or more dangerous—than in the selective vilification of the American Israel Public Affairs Committee (AIPAC). For the past few cycles, progressive rhetoric has uniquely fixated on AIPAC’s political spending, describing it in terms that border on conspiratorial. AIPAC money is routinely characterized not merely as political opposition, but as a dirty, foreign, subverting force buying up American democracy.

When we look at the facts, this obsessive, singular fixation on pro-Israel money reveals a disturbing double standard. Political spending is ubiquitous. Labor unions, environmental groups, tech oligarchs, and now massive pro-Palestine Super PACs like American Priorities all spend tens of millions of dollars to influence elections.

To suggest that money spent by pro-Israel Americans is uniquely corrupt, while millions of tech-advertising dollars weaponized against Israel is just “participating in the process,” crosses a clear line. It taps into ancient, antisemitic tropes about wealthy Jewish cabals buying political outcomes. The reality is simple: the anti-Israel side of the aisle is playing the exact same high-stakes, big-money game. They are utilizing super PACs, courting tech elites, and flooding the airwaves.

The Bottom Line

The story of AppLovin’s executives financing American Priorities should forever change how we talk about campaign finance. It proves that there are no uniquely pure actors in modern American politics. Everyone uses money. Everyone uses PACs. The next time a progressive politician rails against the corrupting influence of outside spending, look at who is funding their defense. The myth of the pure grassroots crusade is officially over.

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Ten Features of My New Retirement-Security Book

David Bernstein — Sat, 18 Jul 2026 23:49:00 GMT

American retirement policy provides sharply different opportunities depending on where and how a person works. Employees with strong 401(k) plans may receive high contribution limits, employer matches, automatic enrollment, low-cost investments, and substantial legal protections.

Contractors, caregivers, part-time workers, employees of small businesses, and workers trapped in weak employer plans often receive far less. They may face lower contribution limits, no employer contributions, higher fees, fragmented accounts, and weaker protections.

My new Kindle book, A Third-Party Tax Reconciliation Approach to Retirement Security, proposes a middle path. It preserves employer plans and private investment choice while creating portable accounts, stronger plan standards, better federal matching contributions, and safeguards designed to ensure that more retirement wealth survives until retirement.

Here are ten features of the proposed approach.

1. It creates IRA–401(k) parity.

Workers without an employer plan should have comparable retirement-saving opportunities.

Eligible workers could use a portable, employee-owned IRA.
Its contribution limit would equal the 401(k) employee-deferral limit.
Workers would no longer face a sharply lower saving limit solely because their employer does not offer a plan.

2. It makes retirement saving portable across jobs and income sources.

Workers should be able to continue saving and consolidate their accounts as their employment changes.

Workers could designate one primary portable account.
Employers and platforms could contribute directly to that account.
Contributions from multiple jobs or income sources could flow into the same account.
Small 401(k) balances would automatically roll into the IRA during job transitions.
Employers could continue offering their own plans without controlling all of a worker’s retirement saving.

3. It makes Roth saving fairer.

Roth opportunities should not depend on income or the design of an employer’s retirement plan.

Eligible portable-account savers could contribute directly to Roth accounts without the usual income phaseout.
Access to large Roth conversions would no longer depend on whether an employer plan permits after-tax contributions and in-service conversions or rollovers.
Backdoor Roth contributions would not trigger large tax costs because of the IRA pro-rata rule.
Portable accounts would receive uniform federal creditor and bankruptcy protection.
Aggregate contribution limits would prevent double benefits across multiple accounts.

4. It establishes minimum standards for retirement plans.

Tax-preferred plans should provide workers with reasonable fees, sound investments, and basic protections.

Employer contributions would vest more quickly.
Plans would offer low-cost index funds, target-date funds, and inflation-protected investments, including Series I bonds.
Fees and expected retirement income would be disclosed clearly.
High-fee, opaque, or illiquid investments would be restricted in default portfolios.
Workers in especially poor plans could direct future contributions to a qualified portable account.

5. It automatically consolidates stranded retirement accounts.

Workers should not accumulate forgotten accounts every time they change jobs.

Small balances could roll automatically into the worker’s designated portable account.
A national account locator would help workers find lost or forgotten savings.
Consolidation would reduce fees, paperwork, and abandoned accounts.
Automatic rollover balances would not interfere with ordinary backdoor Roth contributions.

6. It protects a core retirement balance.

Retirement accounts should provide limited emergency flexibility without allowing workers to empty them before retirement.

Workers could access no more than half of their cumulative employee and employer contributions.
Investment earnings and the remaining contributions would stay protected.
Complete cash-outs, repeated hardship withdrawals, and plan loans would be prohibited.
Limited exceptions would remain for permanent disability or terminal illness.

7. It directs larger federal matches to households that need them.

Traditional tax deductions provide the largest benefits to households in high tax brackets, while lower-income workers often receive little immediate assistance.

The federal government could match 100 percent of the first $1,000 contributed.
It could match 50 percent of the next $1,000.
Treasury would deposit the match directly into the retirement account.
A gradual income phaseout would avoid sharp eligibility cliffs.

8. It protects spouses and unpaid caregivers.

A nonworking spouse should not lose the ability to build independently owned retirement savings because a married couple files separate tax returns.

A nonworking spouse could make a spousal IRA contribution when married filing separately.
Safeguards would prevent duplicate contributions or excessive household benefits.
The change would help couples whose filing decision is influenced by student-loan repayment rules.

The proposal would also protect people who leave paid employment to provide unpaid family care.

Qualifying caregiving would count as earned income for retirement-account eligibility.
Eligible caregiver deposits could receive a federal match.
The retirement account would belong to the caregiver rather than the earning spouse.

9. It makes Trump Account contributions permanent and coordinates them with Social Security reform.

Trump Accounts should support both early-adult needs and long-term retirement security.

Make federal contributions to Trump Accounts permanent.
Allocates one portion of Trump account to support education, training, or a first home and the other portion for retirement.
Coordinate expanded Trump Accounts and these retirement reforms with long-term changes to Social Security benefits.
Require any guaranteed-return feature to be capped, funded, and transparently scored.

10. It finances new assistance by taxing very large Roth inheritances.

Roth accounts should remain valuable retirement tools without becoming unlimited tax-free inheritance vehicles.

A 7 percent tax would apply only at death.
It would apply only to aggregate Roth balances exceeding an inflation-indexed $1 million threshold.
The first $1 million would remain untouched.
The revenue would help finance Saver’s Matches, caregiver assistance, and permanent Trump Account contributions.

Concluding Remarks: These proposals are not intended to replace 401(k)s, IRAs, or Social Security. They are designed to connect them more effectively and reduce the extent to which retirement outcomes depend on a worker’s employer, marital circumstances, caregiving responsibilities, or access to sophisticated financial advice.

The book translates these broad ideas into 21 legislative provisions that could form part of a tax-reconciliation bill. Many of the changes involve contribution limits, tax qualification, federal matching payments, account administration, and the treatment of large Roth balances at death.

Retirement reform must also be coordinated with long-term Social Security reform. Reductions in future Social Security benefits or increases in the retirement age would be more defensible if workers—especially lower-income workers, caregivers, and those without strong employer plans—were first given a better opportunity to build protected private retirement wealth.

A Third-Party Tax Reconciliation Approach to Retiremetn Security is not Available on Kindle.

Primary Fault Lines, November Collisions

David Bernstein — Sat, 18 Jul 2026 21:28:22 GMT

Unresolved ideological primary contests, between progressives and centrists on the Democrat side and between MAGA and traditional conservatives on the Republican side will directly shape the contour of the battle for control of the House of Representatives this November. Here are ten districts with unresolved primaries, as of July 18, 2026, which will have a large impact on the contest for control of the House of Representatives.

AZ-06

The Democratic primary features a battle between progressive challenger JoAnna Mendoza and centrist Kirsten Engel, who is seeking her third consecutive run for this seat. Republican incumbent Juan Ciscomani is running unopposed for re-election. In this EVEN Toss-up district, nominating a centrist keeps Democrats highly competitive, whereas choosing a progressive likely drops independent suburban support and hands Ciscomani an effortless path to victory.

AZ-01

Centrists Amish Shah and Marlene Galán-Woods hold the advantage over progressive lane-holder Jonathan Treble, with frontrunner Shah seeking his second consecutive general election campaign. (Shah was arguably the more “progressive” option in 2024. These labels are fluid.)

The wide-open Republican primary to replace the retiring incumbent is a highly competitive, vacant-seat race primarily between traditional conservative Jay Feely and MAGA-aligned Joseph Chaplik. In this R+1 Toss-up playground, a hard-right GOP nominee maximizes a centrist Democrat’s chances to flip the seat, while a moderate Republican candidate dramatically squeezes a progressive Democrat’s general election prospects.

WI-03

The Democratic primary features a sharp contrast between centrist frontrunner Rebecca Cooke and progressive Eau Claire City Council President Emily Berge. Hardline conservative incumbent Republican Derrick Van Orden faces no primary opposition as he prepares to defend this rural battleground. In this Lean Republican terrain, nominating a centrist like Cooke keeps Democrats competitive with rural ticket-splitters, while a progressive nominee allows Van Orden to easily consolidate moderate swing voters.

MI-07

The Democratic primary is split between national security centrists Bridget Brink and Matt Maasdam and progressive climate organizer William Lawrence. Republican incumbent Tom Barrett faces an open primary road to secure his nomination for this highly competitive frontline seat. In this EVEN Toss-up district, a centrist nominee preserves the winning coalition model used previously by Elissa Slotkin, whereas a progressive nominee shifts the ideological battlefield, significantly lowering the barrier for Barrett to hold the seat.

WA-03

Bipartisan centrist incumbent Representative Marie Gluesenkamp Perez faces a robust, progressive challenge from the left in activist Brent Hennrich. On the Republican side, traditional conservative state Senate Minority Leader John Braun is clearing the field with heavy establishment and Trump backing. In this Lean Democratic district, a successful progressive primary challenge would radically upend the general election math, opening a massive door for Braun to flip the seat back to the GOP column.

MI-10

Centrists Tim Greimel and Christina Hines face progressive Eric Chung in a heavily funded open-seat primary to replace John James who is running for governor. The Republican field is an active, multi-candidate primary anchored by traditional suburban conservative favorite Michael Bouchard. In this Tilt/Lean Republican Detroit-area battleground, a moderate Democratic nominee keeps suburban independent margins entirely fluid, while a progressive nomination likely allows Bouchard to comfortably cruise to victory.

MN-02

The Democratic primary is an open clash between establishment-aligned moderate incumbent Angie Craig and a grassroots progressive activist running on a robust social safety net expansion. On the Republican side, a competitive primary continues to boil between a traditional conservative suburban businessman and a hard-right MAGA candidate. In this Lean Democratic suburban battleground, a progressive upset over Craig would spark massive national conservative super PAC spending, turning a generally safe seat into an immediate Toss-up.

FL-09

The Democratic primary features moderate incumbent Darren Soto facing a determined progressive challenger focusing heavily on housing affordability and bold climate legislation. The Republican primary remains a competitive multi-candidate fight among local conservatives aiming to exploit shifting state dynamics. In this Lean Democratic district, a progressive primary victory risks accelerating the state’s recent conservative shifts, narrowing the Democratic path to holding the seat in November.

KS-03

Centrist standard-bearer incumbent Sharice Davids faces a vocal primary challenger from the left demanding swift Medicare for All implementation and full student debt cancellation. The Republican primary is actively contested by two traditional pro-business fiscal conservatives running on agricultural stability. In this Lean Republican district, a progressive nominee faces an incredibly steep climb with suburban moderates, making a Davids primary win essential for keeping the general election competitive.

AK-ALL

In this Lean Republican statewide seat governed by Ranked-Choice Voting (RCV), the top two finishers are virtually guaranteed to be Mary Peltola and Nick Begich. The ideological makeup of the third and fourth place positioners could determine the outcome in a rank choice voting election.

The November Horizon

The battle for the majority relies on winning the center, the ongoing primary trends are actively paving the way for an even more polarized, unyielding Washington in 2027. Hard as it may be to imagine deeper gridlock, progressive surges in deep-blue bastions and MAGA dominance in deep-red terrain are structurally locking in a hyper-partisan legislative baseline.

Consider this a preview of coming attractions. When the primary season ends, we will provide a rigorous assessment of the likely outcome of the contest for the control of both the House and Senate and an evaluation of the likely ideological makeup of the new Congress. Beyond mere partisan counts, that deep dive will explore whether a deeply fractured legislative branch can manage fundamental governance, or if institutional gridlock will completely freeze the national agenda. Stay tuned.

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Economically Efficient Climate Change Investments

David Bernstein — Fri, 17 Jul 2026 22:40:03 GMT

The Inflation Reduction Act devoted an initially estimated $369 billion over fiscal years 2022–2031 to climate and energy programs, but uncapped credits made the eventual cost potentially much higher. Although the law addressed a genuine environmental externality, it relied too heavily on subsidies for favored technologies rather than policies rewarding the least expensive emissions reductions.

Most economically efficient

Methane emissions charge: Directly priced excessive releases from major oil and gas facilities—the provision closest to conventional “polluter pays” policy.
Technology-neutral clean-electricity credits: Rewarded very low-emission electricity rather than permanently selecting wind, solar or another technology.
Targeted nuclear support: Potentially efficient when it prevented a viable zero-carbon plant from closing and being replaced by fossil generation.
Research, demonstrations and transmission: Addressed innovation spillovers, coordination failures and infrastructure bottlenecks.

Defensible only with strict limits

Hydrogen and carbon capture: Worth retaining for difficult industrial uses only when payments reflected verified lifecycle emissions reductions.
Targeted residential solar, battery and efficiency incentives: Smaller credits could help lower- and middle-income households overcome financing barriers and support useful battery storage.
Charging infrastructure: Networks may require initial support, but subsidies should decline as use increases.

Least economically efficient

Broad EV purchase credits: Paid many affluent households that would have bought an EV anyway and ignored mileage, vehicle weight and the vehicle replaced.
Broad, untargeted homeowner credits: Rewarded installation costs regardless of household income, whether the investment was additional, electricity produced or grid value.
Advanced-manufacturing credits: Pursued industrial or national-security objectives without tying benefits closely to emissions reductions.
Domestic-content, wage and location bonuses: Pursued separate political goals while increasing the cost of emissions reductions. CBO concluded that such conditions can raise project costs and alter investment decisions.
Poorly measured fuel subsidies: These included incentives for sustainable aviation fuel, ethanol-based aviation fuel, biodiesel, renewable diesel and fuels made from corn, soybeans, animal fats or waste products. Depending on feedstock and production, a nominally renewable fuel may provide only modest emissions savings. Credits are defensible only when lifecycle calculations capture fertilizer, processing energy, land conversion and diversion of feedstocks from other uses.

What Republicans Repealed—and What Should Have Survived

The 2025 Republican reconciliation law ended the new, used and commercial clean-vehicle credits; terminated residential clean-energy and efficiency credits; and restricted clean-hydrogen, clean-electricity and advanced-manufacturing credits. It also delayed the methane emissions charge until emissions reported for 2034.

Provisions that deserved reduction or repeal

Large EV credits, particularly subsidies for affluent purchasers of expensive new vehicles.
Open-ended manufacturing credits insufficiently tied to measurable environmental benefits.
Overlapping domestic-content, wage and location bonuses that increased the cost of meeting climate goals.
Fuel credits based on questionable lifecycle-emissions estimates.

Provisions the law cut too aggressively

Residential solar, battery and efficiency credits: These should have been reduced, income-targeted and tied more closely to household or grid benefits—not abolished.
Used-EV credits: A smaller credit for lower-priced used EVs purchased by low- and middle-income households could have survived.
Technology-neutral clean-electricity credits: These deserved a gradual phaseout rather than abrupt restrictions.
Research, demonstration and infrastructure programs: These can address genuine innovation and coordination failures.

Provisions that should have been preserved

The methane emissions charge, because it directly priced a harmful externality.
Targeted nuclear support for plants genuinely at risk of being replaced by fossil generation.
Low-income energy assistance where financing barriers prevent otherwise worthwhile investments.

The law also extended and modified the Section 45Z clean-fuel credit through 2029 while repealing other climate incentives. Republicans therefore preserved a questionable fuel subsidy while weakening more economically defensible policies.

The Joint Committee on Taxation estimated that the energy-tax changes would increase federal revenue by about $499 billion over 2025–2034. Those savings were not used primarily for deficit reduction or a revenue-neutral environmental reform; they helped finance a much larger package of tax cuts.

Redesigning the Weakest Provisions

The weakest Biden provisions could have been replaced by revenue-neutral changes in relative prices:

Electric vehicles: Eliminate large credits for affluent purchasers and luxury vehicles. Retain a modest credit for lower-priced used EVs bought by low- and middle-income households, financed by fees on unusually heavy or high-emission new vehicles. EV owners already avoid gasoline taxes, reducing the need for a large purchase credit.
Residential solar and batteries: Replace the broad 30 percent installation credit with smaller, income-limited assistance. Utilities could receive tax credits or direct-payment equivalents for rebates, leases and performance payments tied to verified battery availability or peak-period discharge.
Solar buybacks: Compensate households according to when electricity is exported and the value it provides to the grid—not automatically at the full retail price, which also finances transmission, distribution and other system costs.
Clean fuels: Replace fixed subsidies with a feebate. Fuels with high verified lifecycle emissions would pay a fee, while genuinely cleaner fuels would receive credits financed by those payments.
Home efficiency: Fees on unusually inefficient furnaces, water heaters and appliances could finance targeted rebates for efficient replacements, particularly in lower-income households and rental properties.
Broader carbon pricing: Carbon fees could be returned through payroll-tax reductions, refundable credits or equal dividends. Most low- and middle-income households could remain financially whole while retaining incentives to choose cleaner products.

Conclusion

The Biden program should have been trimmed and redesigned rather than broadly repealed. Republicans eliminated some poor subsidies but also weakened efficient provisions and used the savings to help finance tax cuts. The larger problem is that Congress appears to contain no organized constituency for the economically preferable middle course: pricing environmental costs, returning the revenue to households, and limiting subsidies to genuine market failures.

A separate memo should examine utility resistance to rooftop buybacks, appropriate export prices, battery subsidies, virtual power plants, utility ownership or leasing, and federal-state regulatory responsibilities.

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Ideology and the Environment

David Bernstein — Fri, 17 Jul 2026 04:06:47 GMT

American environmental policy was never free of conflict, but it once rested on a broad agreement: pollution imposes costs on others, government has a legitimate role in correcting those costs, scientific expertise matters, and policy should seek the greatest environmental gain at the lowest reasonable cost. Republican presidents created and strengthened the EPA, supported an international ozone treaty, and embraced emissions trading, while Democrats negotiated within the same general framework. This framework no longer exists. Republicans increasingly treat climate action as an ideological threat, while Democrats use environmental urgency to justify costly subsidies, mandates, and deadlines.

This is the first in a series on how energy and environmental policy moved away from economic principles and toward partisan warfare.

A Problem Economists Thought They Understood

Environmental policy once rested on a broadly shared economic principle: when an activity imposes uncompensated costs on others, policy should seek to make those costs part of the decision. Economists and political leaders could disagree over taxes, tradable permits, standards, liability rules, or public investment while accepting that common approach.

That consensus has collapsed. Republicans increasingly treat climate action as an ideological threat, while Democrats too often invoke environmental urgency to justify costly subsidies, mandates, and deadlines without sufficient economic scrutiny. How did a field once organized around externalities, incentives, and comparative costs become another arena of partisan identity?

The Bipartisan Environmental Settlement

Republicans and Democrats have long disagreed profoundly over the proper role of government. Historically, however, they often worked together to improve the environment using a shared framework: identify the harm, compare the costs of alternative remedies, and seek practical results.

EPA and clean air. In 1970, Richard Nixon established the Environmental Protection Agency and selected William Ruckelshaus as its first administrator. Nixon also signed the modern Clean Air Act after it passed the Senate 73–0 and the House 375–1.
Clean water. Nixon vetoed the 1972 Clean Water Act largely because of its cost, but Congress overrode him with bipartisan supermajorities. Bipartisanship did not eliminate disagreement; it preserved a common commitment to cleaner air and water.
Hazardous waste. Jimmy Carter signed the Superfund law in 1980, establishing federal authority to clean up contaminated sites and require responsible parties to pay. Ronald Reagan signed major amendments strengthening the program in 1986.
EPA credibility. After an early Reagan-era scandal weakened confidence in the agency, Reagan brought Ruckelshaus back in 1983 to restore its independence and credibility.
Ozone protection. Reagan’s administration helped negotiate the 1987 Montreal Protocol, which phased out chemicals that damaged the stratospheric ozone layer. The agreement became one of the most successful examples of international environmental cooperation.
Lead reduction. During the Reagan administration, the EPA also accelerated the phaseout of lead from gasoline, producing major public-health benefits.
Acid-rain trading. President George H. W. Bush and EPA Administrator William K. Reilly secured the 1990 Clean Air Act amendments with overwhelming bipartisan support. Its acid-rain program capped sulfur-dioxide emissions while allowing companies to trade permits, combining an environmental limit with market flexibility.
Brownfields. Under George W. Bush, EPA Administrator Christine Todd Whitman helped advance bipartisan legislation encouraging the cleanup and redevelopment of contaminated industrial properties.
Climate policy. The shared framework extended into the climate debate. John McCain and Democrat Joseph Lieberman introduced a market-based cap-and-trade proposal in 2003, and McCain campaigned for greenhouse-gas limits in 2008.

These policies were contested, and their results were not uniformly successful. But mainstream Republicans and Democrats generally agreed that environmental harms required action and that the debate should focus on which remedy worked best—not on whether the problem deserved a response.

That consensus—and the ability to work together—has collapsed. Several forces may explain why.

1. Climate change is a harder environmental problem. Smog, sewage, lead, acid rain, and toxic waste produced visible and often local harm. Carbon dioxide has global, cumulative, and delayed effects. Its costs are harder to observe, and the benefits of reducing emissions are dispersed across countries and generations.

That difference does not change the economics. Greenhouse-gas emissions impose costs that emitters do not fully bear. They remain negative externalities, and the proper debate should concern how to price or regulate those costs.

2. The parties no longer describe the same problem. Many Democrats call climate change an existential emergency, making delay or compromise appear morally unacceptable. Many Republicans argue that carbon dioxide is not pollution, that the threat is exaggerated, or that government should do little about it. A debate over how to correct an externality becomes a clash between catastrophe and denial.

3. Energy policy became part of political identity. Climate policies impose different costs on oil-producing regions, farming communities, industrial areas, rural drivers, and affluent cities. Electric vehicles, pickup trucks, gas stoves, pipelines, wind turbines, and solar panels have also become partisan symbols. Once technologies signal political allegiance, evidence about where they work and what they cost becomes less influential.

4. Democratic policies became larger and more prescriptive. The emphasis shifted from changing relative prices toward subsidies, mandates, and deadlines intended to transform entire industries. California’s vehicle rules and the Inflation Reduction Act illustrate an approach that often selects preferred technologies rather than allowing consumers and businesses to find the least costly way to reduce emissions.

5. Republican opposition became more categorical. Republicans have legitimate concerns about regulatory costs, reliability, rural burdens, permitting, and excessive administrative power. But the Trump administration has gone beyond challenging poorly designed policies by obstructing wind and solar projects even when they may provide economically competitive power and environmental benefits.

6. Economic interests now reinforce the divide. Traditional energy producers defend existing markets, while clean-energy companies defend subsidies, tax credits, mandates, and regulations that expand their own. Automakers, utilities, fossil-fuel companies, renewable-energy developers, and environmental organizations all use the political process to protect or enlarge their positions.

7. The political process itself may have deteriorated. We should not romanticize the past, but leaders such as Henry Jackson, Hubert Humphrey, Edmund Muskie, Jacob Javits, Clifford Case, Howard Baker, John Chafee, Mark Hatfield, and Richard Lugar often combined strong convictions with policy expertise, cross-party negotiation, and a willingness to accept partial victories.

Today, Congress legislates less, presidents rely more heavily on executive action, and each administration attempts to reverse the last. The political system increasingly rewards loyalty, confrontation, and ideological certainty rather than technical competence and durable compromise.

These forces reinforce one another. Democratic claims of impending catastrophe encourage sweeping programs, while Republican denial and obstruction reduce the incentive to design more disciplined alternatives. The result is no longer a competition between two economically coherent approaches, but a choice between expansive mandates and subsidies on one side and broad resistance to climate action on the other.

Today, Congress legislates less, presidents rely more heavily on executive action, and each administration attempts to reverse the last. Donald Trump’s personal hostility toward wind and solar is unusually explicit, but the deterioration is broader than one president. The political system increasingly rewards loyalty, confrontation, and ideological certainty rather than technical competence and durable compromise.

Missing from this debate is the approach economists once expected the parties to debate -- identify the external cost, place a price or limit on it, give households and businesses flexibility in responding, and assist workers and communities bearing disproportionate costs.

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Free on Kindle July 17: A Durable Path Forward on American Health Care

David Bernstein — Thu, 16 Jul 2026 19:28:53 GMT

On Friday, July 17, 2026, the Kindle edition of my book, A Durable Path Forward on American Health Care, will be available free on Amazon for one day.

Download it here:

https://www.amazon.com/dp/B0H89VPTF7

American health-care debates are usually presented as a choice between defending the current system and replacing it almost entirely with Medicare for All. This book argues that there is another path: a practical series of reforms that could expand coverage, reduce premiums, improve portability, and move the country closer to universal coverage without requiring the immediate destruction of the employer and private-insurance systems.

The book focuses on four major reforms:

Federal catastrophic reinsurance to reduce premiums and protect insurers against exceptionally expensive claims.
Portable, employee-owned health coverage that workers can keep when they change jobs.
Modernized health savings and flexible spending accounts that provide greater flexibility and reduce waste.
A more efficient role for Medicaid, particularly where it can provide better coverage at a lower cost than heavily subsidized private insurance.

Why the Book Is Worth Reading

The book’s strongest feature is that it does not treat health-care reform as an ideological contest in which one side must win everything and the other must lose everything. It examines how public programs, private coverage, employer contributions, reinsurance, and individual savings accounts can work together.

It also addresses one of the most neglected questions in health policy: how reforms interact. Reinsurance can lower premiums and federal subsidy costs. Portable employer contributions can reduce coverage losses when workers change jobs or become unemployed. Medicaid can sometimes cover lower-income families more efficiently than private plans. Savings-account reforms can give households greater control without expecting them to finance catastrophic medical bills on their own.

Readers will not agree with every proposal, but the book offers a serious framework for moving beyond the familiar stalemate between defending an inadequate status quo and promising a politically and economically disruptive transformation.

Please Help on July 17

Please download the Kindle edition while it is free on July 17, even if you do not expect to read it immediately.

After reading it, please consider:

Leaving an honest review on Amazon.
Recommending it to friends, colleagues, health-policy professionals, and elected officials.
Sharing the Amazon link through social media or email.
Sending me comments, disagreements, or suggestions for improving the proposals.

Free downloads can help introduce the book to a much wider audience. Reviews and recommendations are especially valuable because they help other readers decide whether the book deserves their attention.

Free on Kindle on July 17, 2026:

https://www.amazon.com/dp/B0H89VPTF7

Thank you for reading, downloading, reviewing, and sharing.

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Ten Features of My New Student-Debt Book

David Bernstein — Wed, 15 Jul 2026 17:38:26 GMT

The student-debt debate has become trapped between two unsatisfactory positions. Progressives often emphasize broad loan cancellation that is expensive, poorly targeted, and politically vulnerable. Republicans have moved toward a repayment system that can keep borrowers making income-based payments for as long as thirty years.

My new Kindle book, A Third-Party Tax Reconciliation Approach to Student Debt: Front-Loaded Relief, Faster Principal Reduction, Fairer RAP Rules, and a Durable Endpoint for Long-Term Debt, offers a third path. It provides substantial assistance when borrowers need it most, accelerates principal reduction, corrects serious flaws in the new Repayment Assistance Plan, and creates a manageable endpoint for debt that remains after twenty years.

The objective is neither indiscriminate cancellation nor decades of punitive collection. Student debt should be a temporary financial obligation—not a claim on a borrower’s earnings that persists into middle age or retirement.

Here are ten features of the book.

1. It breaks out of the forgiveness-versus-punishment debate.

Borrowers do not need a choice between having nearly everything canceled and remaining indebted for thirty years. The book develops a middle course that provides meaningful relief while preserving a real obligation to repay. Borrowers receive help eliminating debt, while taxpayers are protected from open-ended subsidies and indiscriminate cancellation.

2. It concentrates assistance when borrowers need it most.

The proposal provides zero interest during the first twenty-four months of required repayment, with the possibility of a thirty-six-month period if budget scoring permits. Recent graduates are often earning less, establishing households, paying high housing costs, beginning families, or completing professional training. Assistance delivered during these years can prevent financial trouble before interest and missed payments begin to compound.

3. It makes every early payment reduce principal.

A zero-interest starting period does more than temporarily reduce monthly costs. It allows every scheduled payment to reduce the amount owed.

A borrower with $35,000 of debt at 6.5 percent who continues making a normal ten-year payment during a two-year zero-interest period could finish repayment approximately seventeen months earlier and save roughly $6,795 in lifetime interest. A three-year period could shorten repayment by about twenty-two months and reduce interest by approximately $9,007.

4. It redirects an inefficient tax preference toward direct debt reduction.

The existing student-loan-interest deduction provides relief only after interest has been paid. Its value is limited for borrowers with low incomes or little income-tax liability, and it does nothing directly to accelerate principal reduction.

The book proposes repealing or phasing out the deduction and using the revenue to help finance the introductory zero-interest period. Instead of modestly subsidizing the cost of carrying debt, federal policy would help borrowers eliminate the debt sooner.

5. It creates a more predictable conventional repayment system.

Federal student-loan interest rates should not depend heavily on the Treasury-market conditions prevailing during one annual pricing window. Students who happen to enter school when interest rates are high should not be locked into substantially higher borrowing costs for years.

The book proposes a stable federal rate—approximately 4.5 percent as a starting point for analysis—so that students can better understand and compare their future obligations before borrowing.

6. It rewards borrowers who establish strong repayment records.

Borrowers who make sixty months of on-time payments would become eligible for a one-time principal reduction equal to 5 percent of the remaining federal balance when refinancing into a qualifying private loan.

This would reward responsible repayment, help borrowers move into ordinary amortizing loans, and remove seasoned performing debt from the federal balance sheet. The proposal also requires clear disclosures and consumer protections so borrowers understand which federal benefits they surrender when refinancing.

7. It repairs RAP’s abrupt payment cliffs.

Under the new Repayment Assistance Plan, the applicable percentage can be imposed on a borrower’s entire adjusted gross income. Crossing an income threshold can therefore cause a surprisingly large increase in the required payment.

The book replaces these whole-income bands with marginal brackets. A higher percentage would apply only to income within the higher bracket. Borrowers would still pay more as their income rises, but a modest raise or promotion would no longer trigger a disproportionate jump in the entire payment.

8. It reduces RAP’s penalties on marriage, work, and inflation.

RAP can sharply increase payments when a borrower marries, particularly when only one spouse has student debt. Filing separately may lower the loan payment but produce a larger income-tax bill and interfere with other household benefits.

The proposal creates wider married thresholds and permits a separate-income calculation without requiring married couples to file separate tax returns. It also indexes RAP’s brackets, minimum payments, and dependent allowances so ordinary inflation does not raise payments when real purchasing power has not increased.

9. It provides a durable endpoint without automatically erasing principal.

After twenty years, any remaining federal balance would transfer to a zero-interest Treasury resolution account. Interest would stop accruing, the repayment process would become simpler, and basic Social Security and retirement income would be protected.

This is not automatic forgiveness. Borrowers with substantial income or liquid assets would continue paying principal. The compromise is straightforward: debt should not continue compounding after two decades, but borrowers who retain the ability to pay should remain responsible for what they owe.

10. It provides an implementable legislative roadmap.

The book does not stop with four general reforms. Its appendix translates the framework into twenty-two specific provisions for a possible tax-reconciliation bill.

These provisions cover front-loaded interest relief, hardship payments, a stable federal rate, responsible private refinancing, RAP marriage and inflation reforms, transparent principal accounting, long-term resolution, retirement protections, and federal budgeting. Most have a direct relationship to spending, tax revenue, loan-subsidy costs, interest receipts, or federal collections.

The result is a practical legislative program rather than another declaration that the current system is unfair. It seeks to make relief earlier, repayment faster, RAP fairer, and the endpoint more manageable—while preserving fiscal discipline and a meaningful obligation to repay.

View the book on Amazon, read a sample, or purchase the Kindle edition here.

A Speech to Israel That Was Really About American Politics

David Bernstein — Mon, 13 Jul 2026 16:22:22 GMT

Rahm Emanuel presents his speech as candid advice to Israelis confronting growing international isolation. I found it deeply disappointing. Instead of seriously addressing Hamas, Hezbollah, Islamic Jihad, Iran, and the repeated failure of Palestinian leaders to accept imperfect but substantial gains, Emanuel delivers an overwhelmingly political argument aimed at an American audience and assigns disproportionate responsibility to Benjamin Netanyahu. He also avoids the Democratic Party’s growing willingness to placate activists and candidates who excuse terrorism, erase Palestinian agency, or treat compromise as betrayal. Diplomacy remains essential, but useful diplomacy must tell Palestinians and their supporters that partial victories should be accepted and built upon—and that replacing Netanyahu will not eliminate Israel’s enemies or its security dilemmas.

Rahm Emanuel delivered a speech at Tel Aviv University setting out his views on “The U.S.-Israel Relationship: Where It Stands Today and the Road Ahead.”

He began by acknowledging Israelis’ deep distrust of renewed peace initiatives after repeated Palestinian rejectionism and violence. He then argued that Prime Minister Netanyahu, enabled by unconditional American support, has relied too heavily on military power while allowing settlement expansion, humanitarian suffering, and diplomatic isolation to worsen. Emanuel proposed replacing the traditional two-state framework with an Arab-led “23-state solution” combining Palestinian reform, Israeli restraint, regional recognition, and economic integration. He also called for conditioning the alliance, sanctioning settler violence and settlement activity, and eventually ending direct American military subsidies while preserving Israel’s qualitative military edge.

Emanuel is an ambitious political figure, and there is widespread speculation that he may seek the Democratic presidential nomination in 2028. His Tel Aviv speech was geared to an audience in America, not Israel. It offered strong criticism of the Israeli government, understated Palestinian and Arab responsibility for the tragedy, and did not offer a practical approach forward. The speech was motivated by the leftward drift and increased support of Hamas inside the Democratic Party, a process which is eroding Jewish support for Democrats, shaping foreign policy and reducing odds for a successful peace process.

Comment One: Emanuel Understates Israel’s Security Dilemma

Emanuel implies that greater restraint or further concessions would improve Israel’s security and legitimacy. But in the West Bank, Gaza, and Lebanon, withdrawal can create openings that Hamas, Hezbollah, Iran, and other armed groups exploit.

• West Bank: Israeli control carries real costs, and some settlements burden the military. But Emanuel never explains how Israel would prevent attacks from territory overlooking Jerusalem, Tel Aviv, Ben-Gurion Airport, and its main population centers.

• Gaza: Israel withdrew in 2005. Hamas then built a base for rockets, tunnels, kidnappings, and the October 7 massacre. After that attack, restraint was not a strategy unless an outside force was prepared to remove Hamas, free the hostages, and govern Gaza. None was.

• Lebanon: Hezbollah’s attacks drove tens of thousands of Israelis from their homes. Israel could accept their indefinite displacement or use force to push Hezbollah back. Emanuel offers no practical diplomatic alternative approach.

Emanuel is right that military gains must produce political results. But a serious roadmap must explain who will enforce any agreement and what happens when Hamas, Hezbollah, or another armed group violates it.

Comment Two: Arab Governments Have Signed Peace Without Preparing Their People for It

Regional normalization was advancing before October 7. But formal agreements did not eliminate popular hostility toward Israel, and many governments did little to reduce it—or actively inflamed it.

• Egypt and Jordan: Their peace treaties have endured, but public and commercial normalization remains limited, while anti-Israel rhetoric is still common in politics, media, religious institutions, and education.

• Abraham Accords states: Diplomatic and economic ties expanded, but government-to-government cooperation did not necessarily produce broader acceptance of Israel among their populations.

• Turkey: Although not an Arab state, it demonstrates the same danger. Its increasingly hostile rhetoric and support for Hamas have led many Israelis to view it as a potential security threat rather than a dependable mediator.

Emanuel asks Israelis to trust regional governments as the “adults in the room.” Yet governments cannot provide a durable foundation for peace while tolerating—or promoting—hatred of Israel at home. Regional cooperation remains essential, but genuine peace will require political and educational change, not merely signed agreements.

Comment Three: The Coalition Emanuel Needs Does Not Exist

Emanuel’s “23-state solution” faces four problems: the Arab coalition does not exist, major non-Arab Muslim powers remain outside it, Iran can sabotage it, and no one has agreed to enforce it when violence returns.

The 23 states are Israel, Palestine, and the 21 other Arab League members. Yet most of those Arab governments do not recognize Israel, several are openly hostile, and others are failed or war-torn states with little capacity to guarantee peace.

The formula also excludes Iran, Turkey, Pakistan, and Indonesia. Iran is the critical disruptor because it can arm Hamas, Hezbollah, and other proxies while intimidating governments that cooperate with Israel. The others could influence or contribute to a settlement, but none currently offers Israel a dependable security partnership.

Regime change in Iran appears to be a prerequisite for successful implementation of Emanuel’s proposal.

Broader Arab and Muslim participation is essential. But even 23 signatures would mean little unless governments are willing to disarm Hamas, prevent its return, and defend the agreement when doing so becomes dangerous or unpopular.

Comment Four: Emanuel Misreads the Democratic Party’s Israel Problem

Emanuel is right that opposition to Israel now extends beyond the Democratic left; Republican isolationism is also growing. But the sharper political shift is within the Democratic Party, where hostility toward Israel—and tolerance for rhetoric rationalizing violence against Jews—has moved closer to the mainstream.

The congressional faction once centered on Rashida Tlaib, Ilhan Omar, and the Squad is growing. Analilia Mejia, who has accused Israel of genocide, already entered Congress from New Jersey. Melat Kiros in Colorado and New York nominees Brad Lander, Claire Valdez, and Darializa Avila Chevalier are favored to join her. Lander calls the Gaza war genocide; Valdez campaigned against that “genocide”; and Avila Chevalier attended an October 8 pro-Palestinian rally and supports one state rather than a Jewish and Palestinian state. Aisha Wahab is competing for Eric Swalwell’s former California seat, while Abdul El-Sayed in Michigan and Cori Bush in Missouri face August primaries.

I have been a Democrat throughout my adult life. Criticism of Netanyahu, Israeli policy, and civilian deaths is legitimate, although as noted it often lacks accuracy or alternative solutions.

What is driving me away is the party’s failure to distinguish such criticism from rhetoric that excuses October 7, equates Israel with Hamas, or refuses to recognize violence against Jews as antisemitic.

• Melat Kiros: She called October 7 an “inevitable” consequence of Israeli policy and declined to identify the deadly Boulder firebombing of a Jewish hostage rally as antisemitic. Her description of the massacre as the predictable “gaze” of an oppressed people crossed from explanation toward rationalization.

• Abdul El-Sayed: He calls Israel a genocidal, apartheid “rogue state” and has compared its government’s evil to Hamas’s. After an explosives-laden truck was driven into a Michigan synagogue, he condemned the attack but added that “hurt people hurt people,” linking the terrorism to Israeli strikes on the attacker’s family.

Such rhetoric shifts responsibility from people who deliberately attack civilians to the society they attack. When terrorism is routinely portrayed as a foreseeable response to Israeli conduct, the accompanying condemnation becomes nearly meaningless.

Emanuel says too little about antisemitism, Hamas apologetics, and Democratic leaders’ failure to set boundaries. Unless the party rejects candidates who rationalize terrorism, erase Hamas’s responsibility, or use “genocide” as a political slogan, it will drive away part of one of its most loyal constituencies—including people like me.

Conclusion: Peace Requires Partial Victories—and Time

Emanuel begins in the wrong emotional place. A useful diplomat must recognize both peoples’ trauma without pretending their culpability is equal. October 7 confirmed Israelis’ fear that withdrawal, economic cooperation, and international assurances cannot protect them from enemies committed to their destruction. Gaza’s devastation reinforced Palestinian beliefs that Israel is indifferent to their lives and aspirations. A speech aimed largely at Israeli failures cannot reach Israelis—or create the mutual recognition peace requires.

This imbalance also makes compromise less likely. When Western leaders increase pressure on Israel while placing fewer demands on Palestinian leaders, they encourage Palestinians to wait for international opinion to deliver more than negotiation can deliver now. Hamas draws the same lesson from demonstrations, genocide accusations, diplomatic recognition, and Israel’s declining support: October 7 changed the world in its favor. A strategy that sacrifices another generation while promising eventual total victory is not a peace strategy.

The 2008 Olmert-Abbas negotiations show the alternative. Olmert offered withdrawal from roughly 94 percent of the West Bank, land swaps intended to compensate for most of the remainder, a corridor to Gaza, and a Palestinian capital in Arab neighborhoods of Jerusalem.

Constructive diplomacy would have urged the Palestinians to bank the enormous gain, establish a state, and continue negotiating unresolved borders and other issues. Europe’s experience shows how slowly trust can develop: after centuries of conflict culminating in two world wars, it still took decades of security cooperation, economic integration, and institution-building before substantially open borders became possible. Diplomacy in this conflict likewise should build a staircase—secure borders, demilitarization, recognition, functioning institutions, trade, and only gradually greater freedom of movement as trust develops. A partial victory today can create the conditions for further gains tomorrow; rejecting it can leave both sides with nothing but more violence.

Emanuel’s regional proposal could become one step on that staircase, but only if Arab and Muslim governments confront Hamas, Hezbollah, Iran, and the glorification of “resistance.” Israelis must accept Palestinian national legitimacy, and Palestinians must accept that Israel will remain a Jewish state. Western leaders must confront antisemitism, reject rationalizations of terrorism, and stop encouraging the belief that pressure on Israel can eliminate the need for Palestinian compromise. Israel should hear Emanuel’s warnings about settlements, civilian suffering, isolation, and military power without a political strategy. Emanuel’s American audience needs an equally difficult message: pandering to the fringe of your political party is not consistent with serious diplomacy.

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Can Investors Find the Few Stocks That Create Most Market Wealth?

David Bernstein — Sat, 11 Jul 2026 21:25:14 GMT

Abstract: Hendrik Bessembinder’s research shows that a remarkably small number of stocks account for most long-term market wealth creation. Jim Cramer interprets that concentration as an opportunity to identify exceptional companies, while Bessembinder emphasizes the enormous cost of failing to own them. Cramer’s FANG recommendation demonstrates that visible, established companies can still produce extraordinary returns, but it does not show that investors can select such winners consistently, hold them through severe declines, and avoid plausible alternatives that underperform the market. The evidence supports stock picking as a possibility, but broad diversification as the more reliable strategy.

Jim Cramer recently highlighted Hendrik Bessembinder’s paper, Which U.S. Stocks Generated the Highest Long-Term Returns? The paper shows that a remarkably small number of stocks generate most long-term stock-market wealth.

Bessembinder treats that concentration as a powerful argument for diversification; Cramer treats it as an invitation to select exceptional companies.

The Bessembinder Evidence

Bessembinder analyzes 29,078 U.S. common stocks contained in the CRSP database from December 1925 through December 2023.

The analysis reveals:

· 51.6 percent of stocks produced negative returns over their listed lifetimes.

· Seventeen stocks produced cumulative returns exceeding five million percent.

· Yet the 17 most spectacular stocks produced an average annual compound return of only 13.47 percent. Their almost unimaginable final returns resulted mainly from compounding over exceptionally long periods.

· Nvidia recorded the highest annualized return among stocks with at least 20 years of data, at 33.38 percent.

These results build on Bessembinder’s earlier and more important paper, Do Stocks Outperform Treasury Bills? That study found that four out of every seven U.S. common stocks produced lifetime buy-and-hold returns below those of one-month Treasury bills. Even more strikingly, the best-performing 4 percent of listed companies accounted for the entire net wealth created by the U.S. stock market since 1926. The remaining 96 percent, taken together, merely matched Treasury bills.

Cramer’s Interpretation

Cramer accepts Bessembinder’s central empirical finding—that most market wealth is generated by a small number of stocks—but still maintains that a portion of an investment portfolio should be placed in individual stocks.

He argues that the extraordinary winners were not necessarily obscure companies discoverable only through luck. Many were familiar businesses—including Coca-Cola, IBM, Boeing, Deere, and Johnson & Johnson—with recognizable products, strong franchises, and long records of success. Exceptional companies, in Cramer’s view, are often visible to consumers and investors before all their gains have occurred.

Cramer is not recommending that investors abandon index funds. His proposed model appears to place approximately half of an investor’s savings in an index fund, with much of the remaining half allocated among roughly five individual growth stocks from different industries, together with some form of non-stock hedge. The index position provides broad diversification and protection against mistakes in the actively selected portion, while one or two “hero stocks” may generate enough appreciation to transform the performance of the overall portfolio.

This position is not wholly inconsistent with Bessembinder. Both agree that a few stocks create a remarkably large share of market wealth. The disagreement concerns whether investors can identify those companies with sufficient reliability and hold them long enough to capture their extraordinary returns.

Bessembinder sees a haystack in which failing to find a few crucial needles can be extremely expensive. Cramer responds that some of the needles are unusually large, shiny, and sitting in plain sight.

Comment One: FANG Was a Great Call, but It Is Not a Complete Test of Cramer’s Method

Cramer deserves real credit for introducing the term FANG—Facebook, Amazon, Netflix, and Google—on February 5, 2013, and repeatedly advocating those companies. He was not merely claiming after the fact that they had been obvious. He identified them publicly before most of their subsequent gains occurred.

Using his own calculation through the end of 2024, $1,000 invested in each of the four original FANG stocks grew from $4,000 to approximately $82,655. The same $4,000 invested in the S&P 500 grew to approximately $19,400. He also calculated that a separate $1,000 investment in Apple would have grown to nearly $18,000.

That was an outstanding call. But the comparison does not establish that exceptional stocks are generally easy to select.

Cramer has made hundreds or thousands of recommendations. A television program built around discussing several stocks every night will inevitably generate both spectacular winners and serious disappointments. Evaluating only FANG creates a selection problem: the winning recommendation is remembered precisely because it won.

A study by Jonathan Hartley and Matthew Olson examined the complete history of Cramer’s Action Alerts PLUS portfolio from 2001 through 2016. The authors found that it underperformed the S&P 500 total-return index both from its inception and from the 2005 launch of Mad Money. It also produced a lower Sharpe ratio, indicating weaker performance after accounting for volatility. That portfolio is not a perfect record of every televised recommendation, but it is much closer to a complete investable record than a retrospective examination of FANG alone.

FANG proves that Cramer can identify an extraordinary group. It does not prove that the ordinary investor can reproduce the result or that Cramer’s complete set of recommendations has beaten the market.

Comment Two: FAANG’s Success Required Investors to Endure Serious Declines

Cramer’s FAANG recommendation produced extraordinary long-term returns, but it has not outperformed in every period. In 2026 through July 11, an equal-weight FAANG portfolio gained about 4.0 percent, compared with about 10.7 percent for the S&P 500.

Its long-term success was also never smooth. An equal-weight FAANG portfolio lost nearly 44 percent in 2022, while Nvidia—another of Cramer’s great long-term successes—fell about 32 percent in 2018 and 53 percent in 2022.

A preset stop or stop-limit order intended to prevent a large loss in Nvidia could easily have removed the stock during one of its severe declines, thereby preventing the investor from receiving much of its extraordinary subsequent gain. The same is true of panic selling: an investor who correctly identifies a future winner but abandons it during a frightening decline will not capture the return that Cramer cites.

Successful implementation therefore required more than identifying the right companies. Investors also needed the financial capacity and psychological resilience to withstand substantial temporary losses without selling, even though they could not know at the time whether a decline was temporary or the beginning of permanent deterioration. That ability to remain invested through uncertainty is one of the most demanding—and least emphasized—parts of the strategy.

Comment Three: Profit-Taking and Retirement Withdrawals Change the Experiment

Cramer’s FANG calculation assumes that the investor reinvested distributions, made no withdrawals, and held the stocks through the end of 2024. That is appropriate for measuring accumulation, but less realistic for retirees or others who must sell assets to finance consumption.

Withdrawals, taxes, rebalancing, and the need to limit concentration can all reduce the amount left to compound in the winning stocks. These consumption-related issues change the calculus, but a full analysis is beyond the scope of this article.

Comment Four: Many Plausible Five-Stock Portfolios Would Have Failed

Cramer’s FAANG selections were excellent, but they were also highly concentrated in technology and communications companies. A more typical investor choosing five admired companies in 2013 might instead have selected names from Fortune’s list—such as Coca-Cola, IBM, Starbucks, Disney, or General Electric—several of which subsequently produced long periods of weak or market-lagging returns.

Many reasonable five-stock portfolios designed to beat the market therefore would not have succeeded. A more diversified way to implement Cramer’s underlying growth thesis would have been to buy a technology ETF such as the Vanguard Information Technology ETF (VGT), either instead of the individual stocks or alongside them, while retaining a broad-market fund such as an S&P 500 ETF for additional diversification.

Conclusion

Cramer and Bessembinder agree about the most important empirical fact: a remarkably small number of stocks produce a remarkably large share of long-term market wealth.

Cramer interprets this concentration as an invitation. Find the exceptional companies, hold them through temporary setbacks, and allow one or two hero stocks to transform the portfolio.

Bessembinder interprets it as a warning. The winners are rare, their identities are obvious mainly in retrospect, and the penalty for omitting them can be enormous. A broad, capitalization-weighted index owns many mediocre companies, but it also guarantees that the investor will own every future hero and that each hero will become a larger part of the portfolio as it succeeds.

Cramer’s FANG recommendation was excellent and should not be dismissed as luck merely because it is inconvenient for advocates of passive investing. Several of the companies were already prominent in 2013, and investors still had an opportunity to earn extraordinary subsequent returns.

But FANG is an example of what was possible, not a reliable estimate of what was probable. The proper comparison is not FANG against the S&P 500. It is the complete set of plausible portfolios that an investor using Cramer’s reasoning might have assembled against the S&P 500.

The investor must also do more than identify the eventual winners. The investor must avoid selling them too early, withstand severe drawdowns, resist stop-loss rules that remove them from the portfolio, manage growing concentration, and finance retirement consumption without liquidating too much of their future upside.

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Ten Features of the Durable Path Forward on American Health Care

David Bernstein — Fri, 10 Jul 2026 20:40:22 GMT

The book A Durable Path Forward on American Health Care lays out an economically and politically feasible path toward universal, high-quality health insurance coverage in the United States.

None of the existing partisan approaches is working. Centrist Democrats continue to patch the Affordable Care Act with temporary subsidies rather than establish durable, adequate coverage. The enhanced Premium Tax Credits were enacted temporarily and extended only through 2025, making them exceptionally easy for a later Congress to allow to expire. Whatever the political rationale, temporary benefits turn health coverage into a recurring election issue rather than a stable national commitment. Progressive Democrats answer with Medicare for All, while Republicans largely respond with eligibility restrictions and spending cuts that make existing coverage problems worse.

This instability has consequences beyond health care. Many Americans cannot accumulate sufficient retirement savings when premiums, deductibles, and medical bills repeatedly drain household finances. Without greater private savings, it will be much harder to make the adjustments eventually required to stabilize Social Security and the nation’s finances.

Here are ten features of the new approach:

1. It focuses on lowering the actual cost of insurance.

Instead of relying exclusively on ever-larger premium subsidies, federal reinsurance would pay part of exceptionally expensive claims before those costs are incorporated into premiums.

2. It could expand coverage at a relatively low net federal cost.

Reinsurance requires federal spending, but it lowers the underlying premiums used to calculate Premium Tax Credits, so part of its cost is automatically offset by smaller subsidy payments. Medicaid may also cover some low-income households more cheaply than heavily subsidized private plans that pay higher provider prices, while portable employer contributions could reduce coverage losses and recession-related Medicaid enrollment when workers lose or change jobs. The proposal is therefore less fiscally expensive than its individual spending provisions might initially appear: several reforms replace or reduce existing federal costs rather than simply adding new ones. These interactions must be incorporated into a dynamic, systemwide budget analysis that measures net costs across reinsurance, Premium Tax Credits, Medicaid, CHIP, and employer-financed coverage.

3. It protects families with seriously ill children.

A separate pediatric reinsurance program would help finance neonatal intensive care, childhood cancer, rare diseases, organ transplants, complex disabilities, and extremely expensive new treatments without loading the entire cost into family premiums.

4. It makes health coverage portable from job to job.

Workers could own their Marketplace policies while employers contribute toward the premiums. Changing jobs, starting a business, reducing hours, or retiring before Medicare would no longer automatically require changing insurance.

5. It reduces job lock and coverage interruptions.

After a layoff, the employer contribution could end and the federal subsidy could be recalculated, but the worker’s underlying insurance policy could remain in place.

6. It protects household savings as well as health coverage.

The book recognizes that insurance is inadequate when families cannot afford their deductibles. It proposes targeted assistance through Health Savings Accounts and would end the wasteful FSA use-it-or-lose-it rule, allowing workers to preserve unused medical savings or transfer excess balances into retirement accounts under carefully designed rules.

7. It reduces penalties on work, raises, and marriage.

A smoother Premium Tax Credit formula would prevent modest increases in earnings from causing abrupt losses of assistance. It would also reduce the marriage penalties that can arise when two incomes are combined and a household suddenly loses a large subsidy.

8. It uses Medicaid where Medicaid works better.

For many lower-income households, Medicaid can provide more comprehensive protection at lower public and household cost than a private policy with a large deductible. The objective is not to maximize government coverage, but to use the most efficient system for each population.

9. It combines private choice with public responsibility and better insurer incentives.

Consumers would continue choosing among privately administered health plans, but a federally sponsored reinsurance program would assume part of the cost of exceptionally expensive claims. Insurers would still negotiate prices, manage care, and bear substantial financial risk, while public rules would determine which high-cost claims qualify for reimbursement and require the resulting savings to reduce premiums. By sharing catastrophic risk, the system would reduce insurers’ incentives to avoid high-cost patients, deny legitimate claims, or impose overly aggressive utilization controls without turning every coverage decision over to the federal government.

10. It provides an implementable legislative roadmap.

The book identifies 25 specific provisions that could translate the four reforms into law. Most operate through taxes, mandatory spending, Medicaid financing, Premium Tax Credits, or employer-benefit rules and therefore appear suitable for the budget-reconciliation process.

The result is not a promise that health care can be made free. It is a serious strategy for making affordable and continuous coverage available to almost everyone while preserving private choice, encouraging work and mobility, protecting household savings, and obtaining better value from public spending.

A Durable Path Forward on American Health Care is for readers who believe the country needs something more ambitious than another temporary subsidy, but more practical, affordable, and politically durable than replacing the entire health-care system with a single federal program.

The Kindle edition costs $5.99. View the book on Amazon.

Most of the revenue from my Kindle publications and paid subscriptions supports economic research and the development of a third-party economic platform.

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The Enshittification of Microfinance

David Bernstein — Fri, 10 Jul 2026 00:47:58 GMT

Microfinance began as one of the most attractive ideas in development economics: small loans to poor entrepreneurs, especially women, who were excluded from traditional banks. But recent reporting and academic evidence suggest that the promise was badly overstated. In some markets, microfinance did not merely fail to end poverty; it became a high-pressure lending industry aimed at people with few alternatives. The dark joke is that payday lenders smell blood in the water, while microfinance lenders call it financial inclusion.

A recent Wall Street Journal article should force a reassessment of one of the most celebrated development ideas of the last half century. Microfinance was once presented as capitalism with a conscience: tiny loans to poor entrepreneurs, often women, who were supposedly denied the chance to build businesses only because traditional banks would not serve them. Muhammad Yunus and Grameen Bank gave the idea moral authority, and foundations, development banks, celebrities, and political leaders turned it into a global cause, culminating in the 2006 Nobel Peace Prize.

The Journal’s reporting turns that origin story upside down, suggesting that an idea created to protect poor borrowers from loan sharks sometimes evolved into a more respectable version of the same debt trap.

The dark joke writes itself: What is the difference between microfinance and payday lending? Branding. Payday lenders smell blood in the water; microfinance lenders call it financial inclusion.

That joke is unfair to the best nonprofit lenders and to borrowers who genuinely use small loans productively. But it captures the danger of the industry’s evolution. Once borrower desperation becomes a scalable asset class, development language can become a disguise for debt extraction.

The Journal’s shorter companion piece makes three claims that are strongly supported by the academic and policy literature. First, microfinance has not delivered the broad anti-poverty gains its advocates promised. Second, the industry changed as microfinance became commercialized. Third, the worst outcomes appear where commercialization, weak regulation, competition among lenders, and borrower desperation interact. Those three claims are enough to support a reassessment of one of the most celebrated development ideas of the last half century.

The leading academic correction came in 2015, when the American Economic Journal: Applied Economics published six randomized evaluations of microcredit. The studies differed across countries and institutional settings, but the overall conclusion was sobering. Microcredit produced some modest changes in borrowing and business activity, but it did not transform income, consumption, business profits, or women’s empowerment for the average borrower.

A later meta-analysis by Rachael Meager reached a similar conclusion: the average effects on household business and consumption outcomes were unlikely to be transformative and might be negligible. The evidence does not prove that every microloan is harmful. It does show that microfinance was oversold as a general cure for poverty.

The second problem is that the industry’s incentives changed. What began as a development project increasingly became an investable financial product. For-profit lenders, development-bank capital, securitized microfinance debt, and private investors encouraged scale, portfolio growth, and high repayment rates. The Journal notes that global microfinance loans reached nearly $220 billion in 2025, covering more than 140 million borrowers, while average loan size increased sharply.

The 2007 Compartamos Banco IPO became an early symbol of the shift: a lender serving poor borrowers could generate large investor profits while charging very high interest rates. Muhammad Yunus, one of microfinance’s founders, warned that poor people’s willingness to pay high interest did not justify charging it; he described the Compartamos model as making money from poor people desperate for cash.

That does not mean for-profit firms caused every failure in microfinance. The more precise point is that commercialization magnified a preexisting weakness. Microfinance was always a narrow tool being asked to do too much. It might help some existing entrepreneurs expand a business, and it might help some households bridge short-term cash shortages. But once lenders, investors, and development banks treated loan growth as success, a disappointing anti-poverty tool became a more dangerous one. The metric quietly shifted from borrower welfare to portfolio expansion.

The third problem is the one that turns disappointment into something darker. In Cambodia, India, and other stressed markets, multiple lenders competed for poor borrowers, loans grew larger, repayment pressure intensified, and some households borrowed not to finance profitable investment but to repay old debts, cover medical bills, or survive income shocks. Human-rights groups in Cambodia have linked excessive microfinance debt to coerced land sales, migration, child labor, bonded labor, reduced food consumption, and suicides. Recent reporting on World Bank/IFC watchdog findings reinforces the central concern: lenders and their funders did not adequately protect borrowers from unaffordable debt and coercive repayment pressure.

The evidence therefore points to a two-part verdict. Microfinance was never the miracle its advocates claimed. But it was not necessarily rotten at birth. It became far more dangerous when a narrow financial tool was scaled into a global lending industry and judged by repayment, growth, and investor return rather than by borrower welfare. The problem was not simply lending to the poor. The problem was treating debt as development.

That is the process of enshittification. A useful or at least plausible service is built around a real need. It gains moral legitimacy, political support, and access to capital. Then the metric of success changes: not whether the user or borrower is better off, but whether the platform, lender, or investor can extract more value from the relationship. Microfinance is not the only industry to follow that path, but it is a particularly painful example because the people being monetized were among the least able to absorb the cost.

Further reading

1. Gabriele Steinhauser, The Wall Street Journal, “Hundreds of Billions in Loans Didn’t Make a Dent in Global Poverty.”
https://www.wsj.com/finance/banking/poverty-microfinancing-loans-entrepreneurs-de458ee8

2. Abhijit Banerjee, Dean Karlan, and Jonathan Zinman, “Six Randomized Evaluations of Microcredit: Introduction and Further Steps,” American Economic Journal: Applied Economics, 2015.
https://www.aeaweb.org/articles?id=10.1257/app.20140287

3. Rachael Meager, “Understanding the Average Impact of Microcredit Expansions: A Bayesian Hierarchical Analysis of Seven Randomized Experiments,” American Economic Journal: Applied Economics, 2019.
https://www.aeaweb.org/articles?id=10.1257/app.20170299

4. Human Rights Watch, “Debt Traps: Predatory Microfinance Loans and the Exploitation of Cambodia’s Indigenous Peoples.”
https://www.hrw.org/news/2025/09/24/cambodia-microfinance-lending-harming-indigenous-groups

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A Durable Path Forward on American Health Care

David Bernstein — Thu, 09 Jul 2026 21:00:36 GMT

A Durable Path Forward on American Health Care

Reinsurance, Portable Coverage, Modernized Savings Accounts, and a More Efficient Role for Medicaid

David Bernstein

www.economicmemos.com

Abstract:

Federal health policy has alternated between expanding Affordable Care Act subsidies and restricting public assistance, without producing a durable settlement. This paper proposes four mutually reinforcing reforms: federal catastrophic reinsurance, portable employer contributions toward employee-owned Marketplace coverage, modernization of Health Savings Accounts and Flexible Spending Accounts, and broader use of Medicaid where it provides better protection at lower cost. Together, the reforms would lower underlying insurance costs, reduce job lock and coverage interruptions, protect household savings, and direct public assistance toward the financing mechanism best suited to each population. Because several provisions would reduce Premium Tax Credit, CHIP, or recession-related Medicaid costs, their net fiscal cost could be substantially lower than their gross cost. The paper also identifies 25 implementing provisions, all of which appear likely to fit within the tax and budget-reconciliation process.

Available in 72 hours or so at kindle.

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The Mega Backdoor Roth and America’s Uneven Retirement Tax Code

David Bernstein — Tue, 07 Jul 2026 21:25:49 GMT

Abstract: American retirement law gives workers dramatically different opportunities to place savings in Roth accounts depending on whether their employer offers a sufficiently flexible 401(k) plan. This article explains how a high-income worker with access to the mega backdoor Roth may place as much as $72,000 into Roth status in 2026, while a similarly situated worker without a workplace plan is generally limited to a $7,500 IRA contribution. It considers reforms that would make Roth saving opportunities more portable and consistent across workers.

Two recent articles at Economic Memos identify a basic inequity in American retirement policy. The tax code does not simply encourage people to save. It gives substantially different saving opportunities to workers depending on whether they have a 401(k), what features their employer has selected, and whether they currently work for an employer that sponsors a suitable plan.

Workers with 401(k) plans generally receive much higher contribution limits than workers dependent on individual retirement accounts. They may also receive employer matching contributions, automatic enrollment, payroll deductions, and institutional investment options. Many workers who lack access to an employer-sponsored plan—particularly employees of small businesses, part-time workers, caregivers, and people moving between jobs—must rely primarily on IRAs with lower contribution limits and generally no employer match.

My earlier retirement-policy proposal therefore advocated universal automatic IRAs, higher IRA limits, and permission for employers to contribute directly to portable employee-owned accounts.

My more recent examination of whether workers should roll old 401(k) balances into IRAs uncovered additional disparities. Keeping money inside a 401(k) can preserve penalty-free access under the rule of 55, keep pretax assets outside the IRA pro-rata calculation used for backdoor Roth conversions, and preserve stronger and more uniform creditor protections. An IRA may offer lower fees and broader investment choices, but it is not a complete substitute for an employer plan.

The discussion that follows identifies three disparities in Roth retirement saving, including unequal access to the mega backdoor Roth.

The first disparity involves direct access and complexity. In 2026, eligibility to contribute directly to a Roth IRA phase out between $153,000 and $168,000 of modified adjusted gross income for single taxpayers and between $242,000 and $252,000 for married couples filing jointly. Above the applicable limit, the taxpayer cannot make a direct Roth IRA contribution.

No comparable income restriction applies to designated Roth 401(k) contributions. A worker earning $300,000, $500,000, or more may still contribute the full employee maximum to a Roth 401(k), provided the employer’s plan offers one. The Roth IRA income restrictions do not apply to designated Roth workplace contributions.

A high-income worker without a workplace plan may often use the ordinary backdoor Roth strategy, but only up to the much smaller IRA contribution limit and subject to the pro-rata rule discussed below.

The second disparity involves contribution limits. In 2026, a worker under age 50 may contribute $24,500 through regular 401(k) salary deferrals, while the total defined-contribution-plan limit—including employee contributions and employer contributions—is generally $72,000. The IRA contribution limit is only $7,500.

The third disparity is the mega backdoor Roth itself. This is not a separate account established by law for everyone. It is a strategy available only when a particular employer plan permits after-tax employee contributions beyond the normal $24,500 salary-deferral limit and permits those contributions to be moved into Roth status through an in-plan Roth conversion or qualifying rollover.

Consider two unmarried, high-income workers under age 50. Each earns $300,000 and has enough disposable income to save substantially more than the ordinary retirement limits.

Worker One: Qualifying Roth 401(k) Plan

The overall limit on annual additions to this worker’s 401(k) is the lesser of 100 percent of compensation or $72,000 in 2026.

The following cases show different ways the same $72,000 can be divided between employee and employer contributions and between Roth and conventional pretax accounts.

The examples assume that the worker is under age 50, earns at least $72,000, and has a particularly flexible 401(k) plan that permits:

Designated Roth 401(k) elective deferrals.
Voluntary employee after-tax contributions beyond the ordinary elective-deferral limit.
Prompt in-plan Roth conversions of those after-tax contributions.
In-plan Roth conversions of other eligible plan balances.

Not every plan offers these features. A plan may also restrict contributions by highly compensated employees to satisfy nondiscrimination rules. In 2026, the regular employee elective-deferral limit is $24,500, while total annual additions—including employee after-tax contributions and employer contributions—generally cannot exceed $72,000.

Case One: No Employer Contribution

Begin with the simplest case. Assume that the employer makes no matching, profit-sharing, or other contribution.

The worker contributes the entire $24,500 elective-deferral limit directly to the Roth 401(k). The worker then makes an additional $47,500 voluntary after-tax employee contribution:

Direct Roth 401(k) elective deferral: $24,500
Voluntary after-tax employee contribution: $47,500
Total annual additions: $72,000

The additional $47,500 is not another elective deferral and is not an employer contribution. The employee has already exhausted the $24,500 limit that applies collectively to regular pretax and Roth elective deferrals. The remaining contribution capacity is calculated as follows:

$72,000 overall limit − $24,500 Roth elective deferral = $47,500

The $47,500 initially enters the plan as a non-Roth after-tax employee contribution. If the plan permits a prompt in-plan Roth conversion, the worker can move it into the plan’s Roth account. Because income tax has already been paid on the contribution, generally only investment earnings accumulated before the conversion are taxable.

Under these assumptions, the worker personally contributes the entire $72,000, and the entire amount can enter Roth status.

Case Two: A $10,000 Conventional Employer Match

Now assume that the employer contributes a $10,000 conventional pretax match. The match counts toward the same $72,000 overall limit. It therefore reduces the employee’s remaining voluntary after-tax contribution capacity:

$72,000 − $24,500 Roth elective deferral − $10,000 employer match = $37,500

The annual additions would initially consist of:

Employee’s direct Roth 401(k) contribution: $24,500
Employee’s after-tax contribution converted to Roth: $37,500
Employer’s conventional pretax match: $10,000
Total annual additions: $72,000

The worker contributes $62,000, and the employer contributes $10,000. Of the worker’s contribution, $24,500 enters directly as a Roth elective deferral, while $37,500 initially enters as a non-Roth after-tax contribution.

If the plan permits a prompt in-plan Roth conversion, the worker may convert the $37,500 to Roth status. Because the worker has already paid income tax on that contribution, the conversion generally produces no additional taxable income except for any investment earnings accumulated before the conversion. If the conversion occurs promptly, those earnings—and therefore the resulting tax—may be negligible.

After the conversion, $62,000 is in Roth status, while the $10,000 employer match remains in the conventional pretax portion of the plan.

The worker could leave the employer match pretax. Alternatively, if the match is vested and the plan permits an in-plan Roth rollover, the worker could subsequently convert the $10,000 match to Roth. The previously untaxed $10,000, together with any untaxed earnings included in the conversion, would then be added to the worker’s taxable income for that year.

After that conversion, the entire $72,000 in annual additions would be held in Roth status. The conversion would not create another contribution or increase the $72,000 limit. It would merely change the tax character of the $10,000 already contributed by the employer.

Case Three: The Employer Match Is Roth From the Outset

SECURE 2.0 created another possibility. A plan may allow an employee to designate certain fully vested matching and nonelective employer contributions as designated Roth contributions when they are allocated. This option is not mandatory; the employer’s plan must affirmatively offer it.

If the plan permits the $10,000 employer match to be designated Roth from the outset, the annual additions would be:

Employee’s direct Roth 401(k) contribution: $24,500
Employee’s after-tax contribution converted to Roth: $37,500
Designated Roth employer match: $10,000
Total annual additions entering Roth status: $72,000

The same $72,000 limit applies. The difference from Case Two is the treatment of the employer contribution. Instead of first entering a conventional pretax account and possibly being converted later, the $10,000 match enters Roth status when allocated. The amount is included in the employee’s taxable income for that year.

These three cases are alternative allocations of the same annual limit:

With no employer contribution, the employee may personally contribute the entire $72,000.
With a conventional $10,000 match that remains pretax, $62,000 enters Roth status and $10,000 remains pretax.
If the conventional match is later converted, or is designated Roth when made, the entire $72,000 may ultimately enter Roth status.

Other allocations are possible. The employee could divide the $24,500 elective deferral between pretax and Roth contributions. The employer could make matching, profit-sharing, or nonelective contributions. Those employer contributions would reduce the remaining room for voluntary employee after-tax contributions because they all count toward the same $72,000 limit.

The central comparison remains striking. A high-income worker with the right employer plan may be able to place the full $72,000 in annual additions into Roth status.

Worker Two: No Workplace Retirement Plan

The second worker has no 401(k). Because the worker’s income exceeds the Roth IRA ceiling, no direct Roth IRA contribution is permitted. The worker may instead contribute $7,500 to a nondeductible traditional IRA and convert it to a Roth IRA through the ordinary backdoor Roth strategy.

But the backdoor transaction does not increase the IRA contribution limit. It merely provides an indirect route for putting the same $7,500 into Roth status.

The annual comparison is therefore:

Worker with the qualifying 401(k): $72,000 in new Roth savings
Worker limited to an IRA: $7,500 in new Roth savings
Difference: $64,500

The worker with the qualifying 401(k) can place 9.6 times as much new money into Roth accounts as the worker who relies entirely on an IRA.

Using the 2026 limits as a constant illustration and ignoring investment returns, ten years of contributions would total $720,000 for the worker with the qualifying plan, compared with $75,000 for the IRA-only worker.

The IRA-only worker’s position may be even worse if that person already holds pretax traditional, SEP, or SIMPLE IRA balances. The ordinary backdoor Roth is then subject to the IRA pro-rata rule, which can make most of the conversion taxable.

Pretax money retained in a 401(k), by contrast, is excluded from that IRA calculation—another advantage attached to workplace-plan access. A worker planning regular backdoor Roth conversions should therefore consider the pro-rata consequences before rolling pretax 401(k) assets into an IRA. This was explained in my memo on rollovers from 401(k) plans to IRAs. Probably don’t do the rollover if you are planning to do backdoors through IRAs.

Congress should choose a consistent principle. It could create a portable, workplace-independent supplemental Roth account available to all workers, subject to a uniform combined contribution limit. It could permit employers to make matching contributions directly into employee-owned IRAs. Alternatively, Congress could restrict exceptionally large plan-based Roth contributions while increasing ordinary IRA limits.

Retirement policy should reward comparable saving consistently—not reserve its most valuable Roth opportunities for a select group fortunate enough to work for the right company.

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Israel and U.S. Politics on Election Night in Colorado

David Bernstein — Wed, 01 Jul 2026 04:03:16 GMT

Abstract: Democratic primaries are elevating candidates who are increasingly hostile toward Israel, while many party moderates offer only qualified or ambiguous support. These election-night reflections consider what this shift means for pro-Israel voters—and whether it creates an opening for an anti-Trump, anti-antisemitism independent movement in 2028.

I am leaving for vacation to visit my new granddaughter. I will return to the subjects of inflation and affordability when I come back.

Tonight is election night—and, for me and many other supporters of Israel and opponents of antisemitism, a deeply discouraging one.

Comment One

I now expect the next Congress to include roughly 15 Democrats whose rhetoric or positions I regard as effectively pro-Hamas. This is my preliminary assessment rather than a final documented count. When I return, I will define precisely what I mean by “pro-Hamas,” identify the members who meet that definition, and add up the total.

Even many moderate Democrats are hedging their support for Israel through vague statements and mixed votes.

AIPAC’s decision to spend heavily to defeat Tom Malinowski in New Jersey’s 11th Congressional District now looks even more misguided. Malinowski’s defeat helped Analilia Mejia, a candidate who describes Israel’s conduct in Gaza as genocide, win the nomination.

After AIPAC-backed primary loss, Tom Malinowski endorses rival who says Israel committed genocide

Comment Two

Moderate Democrats increasingly say that they support Israel but oppose Benjamin Netanyahu and favor a two-state solution. But October 7 demonstrated the enormous security obstacles standing in the way of such a solution.

A woman who wanted to confront me about Israel once asked, “What do you think of Bibi Netanyahu?” My response was: “What do you think of Naftali Bennett and Gadi Eisenkot?”

Both men oppose Netanyahu, but neither treats Israel’s security threats as secondary. Eisenkot is a former chief of staff of the Israel Defense Forces who has broadly supported Israel’s military operations while criticizing Netanyahu’s strategy. Bennett has explicitly said that Israel can no longer permit terrorist organizations to construct extensive military infrastructure along its borders.

This grieving father and former general could challenge Netanyahu

Naftali Bennett says Israel-U.S. alliance is at risk

I do not believe that many of Israel’s American critics would be satisfied with either Bennett or Eisenkot. That suggests that their objection extends beyond Netanyahu himself.

Comment Three

As of tonight’s returns, Melat Kiros appears headed toward victory in Colorado’s 1st Congressional District Democratic primary.

Can we agree that refusing to identify the terrorist firebombing of peaceful Jewish demonstrators in Boulder, Colorado, as antisemitic represents, at a minimum, an indefensible failure of moral clarity?

The attacker targeted a predominantly Jewish gathering supporting the hostages taken on October 7, shouted “Free Palestine,” and attacked participants with incendiary devices and a makeshift flamethrower. One victim later died. Yet Kiros declined to characterize the attack as clearly antisemitic.

Democratic socialist candidate won’t call Boulder attack antisemitic

This is where a substantial part of the Colorado Democratic Party now stands.

Comment Four

Many deep-blue districts that have nominated candidates hostile toward Israel were decided in primaries with turnout far below that of a general election.

In a three-way general-election contest, a viable and well-funded independent candidate who is both anti-Trump and unequivocally opposed to antisemitism could be competitive.

It is too late to place such candidates on the ballot in 2026.

The 2028 effort starts tonight.

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Two Colorado Primaries and the Democratic Party’s Future

David Bernstein — Sat, 27 Jun 2026 22:06:17 GMT

Colorado’s Democratic primaries in CO-1 and CO-8 reveal two of the party’s deepest divisions: Israel and Medicare for All, and the broader conflict between ideological certainty and practical governing. I support Diana DeGette and Shannon Bird because both are better equipped to defend mainstream Democratic values, confront difficult policy tradeoffs and turn political goals into workable legislation.

Colorado’s June 30 Democratic primaries in the 1st and 8th Congressional Districts have implications far beyond Colorado. They illuminate two of the most important fault lines in the Democratic Party’s internal conflict between ideological progressives and pragmatic liberals: Israel and Medicare for All.

Israel is by far the more emotionally divisive issue. It raises fundamental questions about antisemitism, terrorism, national survival and whether unequivocally pro-Israel Democrats still have a secure place in the party.

Medicare for All presents a less visceral but equally revealing test: whether Democrats define commitment by adopting the most sweeping slogan or by developing reforms that can be financed, administered, enacted and sustained.

In CO-1, I strongly support Diana DeGette over Melat Kiros. I do not reach that conclusion reluctantly or simply because DeGette is the incumbent. Kiros’s statements about Israel reflect a moral and historical framework that I find unacceptable after October 7.

Her November 2023 letter about Israel formally says that there was no justification for the Hamas attack. But that sentence appears only after an extended argument portraying the massacre as the predictable expression of “violent resistance” to colonial oppression. The letter calls Israel colonial and apartheid, largely removes Hamas’s ideology and agency from the moral accounting, and invokes a passage asking what kind of hateful “gaze” an occupier should expect from the occupied: “We saw this gaze.”

I regard the letter as pro-Hamas in its moral framing and Hamas-apologetic at its core. It does not openly praise Hamas. Instead, it minimizes the organization’s choices and atrocities while devoting far more attention to explaining why Israelis supposedly brought the attack upon themselves. A formal disclaimer does not neutralize the argument surrounding it.

Kiros’s recent refusal to identify the Boulder firebombing as antisemitic reinforces my concern. The attacker deliberately targeted a predominantly Jewish gathering seeking the return of hostages held by Hamas. He shouted “Free Palestine,” later told investigators that he wanted to kill “Zionist people,” and killed one of his victims. Yet Kiros said she could not know what was in the perpetrator’s heart.

That is not moral nuance. It is ideological blindness.

Medicare for All creates a more complicated comparison because DeGette also says she supports moving toward it. I disagree with her. Replacing most American health financing with a single federal program would require enormous changes in taxation, employment compensation, provider payment, union benefits and existing private and public coverage. It would also concentrate decisions about medical benefits and contested treatments in the federal government, making them more vulnerable to changes in national political control.

But DeGette’s experience distinguishes her from Kiros. DeGette is the ranking Democrat on the House Energy and Commerce Health Subcommittee and could chair it if Democrats retake the House. She has worked on technically difficult health legislation, including bipartisan measures involving medical research, prescription drugs and Medicare transparency.

That record does not make her correct about Medicare for All. It does demonstrate that she understands Congress as an institution in which progress requires hearings, statutory language, budget estimates, implementation rules and coalitions that extend beyond one ideological faction.

I would prefer that DeGette move away from Medicare for All and consider a more practical alternative. My paper, “A Durable Path Forward on American Health Care,” proposes four mutually reinforcing reforms: catastrophic reinsurance to lower underlying premiums, portable employee-owned coverage, modernization of health savings arrangements and broader use of Medicaid where it provides more protective coverage at lower cost.

DeGette has not endorsed my proposal. But her knowledge and committee position make her far more capable of evaluating such ideas, improving them and incorporating workable elements into legislation. I would rather debate health policy with an experienced legislator who understands implementation than entrust it to a candidate whose politics place ideological certainty above complexity.

CO-8 offers the clearer moderate-progressive choice. Manny Rutinel is not Melat Kiros on Israel. He supports Israel’s existence, a two-state solution and continued military assistance. But Shannon Bird is more firmly situated within the mainstream pro-Israel Democratic coalition and has a much stronger record of practical governing.

Bird served on and ultimately led Colorado’s Joint Budget Committee. The Center for Effective Lawmaking ranked her Colorado’s most effective legislator for the 2023–24 term. She has negotiated budgets and worked on education, housing, health care and affordability. That is the often-uncelebrated work through which political promises become actual programs.

Rutinel’s health-care position has also changed. While seeking the Working Families Party endorsement in 2025, he supported single-payer health care. He now emphasizes Medicaid, Affordable Care Act assistance and a public option. Candidates may reconsider their positions, but voters are entitled to ask whether the newer position represents genuine rethinking or adjustment to the realities of running in a swing district.

Bird does not claim that a single enormous federal bill will resolve every weakness in American medicine. Her approach is more incremental, but incremental does not have to mean timid. Restoring coverage assistance, protecting Medicaid, lowering prescription prices, improving Medicare and developing a workable public option could materially improve people’s lives while creating a foundation for further reform.

The common thread between Israel and Medicare for All is judgment.

Can a candidate condemn Israeli policies without rationalizing terrorism or questioning Israel’s continued existence as a Jewish state? Can a candidate pursue universal access to health care without insisting that only one immensely disruptive financing structure is morally legitimate? Can a legislator recognize complexity, compromise where appropriate and still retain clear principles?

DeGette and Bird have demonstrated a greater capacity to make those distinctions and to get things done.

That matters nationally. Congress is losing Democratic Representative Jared Golden of Maine and Republican Representative Don Bacon of Nebraska, two members from competitive districts willing to resist party pressure and work across ideological lines. A Bird victory in the primary and general election could give the House a new leader in that tradition: liberal on many goals, moderate in temperament, supportive of Israel and capable of building coalitions.

I care deeply about these races because I want the Democratic Party to remain both principled and capable of governing. I support reproductive freedom, an effective social safety net and serious public action where markets fail. I also support Israel’s continued existence as a Jewish democracy and its right to defend itself against terrorism.

I want universal access to affordable health care, but I do not believe the answer is to place nearly the entire health-financing system under one federal program. Moral seriousness requires more than adopting the most sweeping position available. It requires understanding tradeoffs, respecting contrary evidence and designing policies that can survive legislation, implementation and future elections.

DeGette and Bird do not agree with me on everything. But they are much more likely to translate Democratic values into durable results. CO-1 will test whether Democrats reject a politics that rationalizes Hamas violence and struggles to recognize antisemitism at home. CO-8 will test whether voters elevate a proven bridge-builder who could help replace the practical leadership Congress is losing.

Together, these races will say a great deal about whether the Democratic Party intends to govern—or merely to signal.

Appendix A: Melat Kiros, Israel and the Historical Record

Kiros’s November 7, 2023, letter was written in response to law firms that had condemned antisemitism, Islamophobia and threats on university campuses. She objected especially to their characterization of calls for Israel’s elimination as antisemitic.

The letter does contain a sentence saying there was no justification for October 7. But the organization of the argument matters. Before reaching that disclaimer, Kiros describes Zionism as colonialism, calls Israel an apartheid state and says that people whose land is taken and whose existence is threatened inevitably “resist with violence in kind.” She then describes October 7 as an “obvious symptom” of violent resistance to colonialism and invokes the “gaze” passage.

That is why I view the letter as Hamas-apologetic despite its formal condemnation. Its moral structure shifts Hamas from perpetrator to symptom. Hamas’s antisemitic ideology, deliberate targeting of civilians, hostage-taking and independent political agency receive little attention. Israel and Zionism are treated as the originating cause from which nearly all subsequent violence follows.

The historical account is also one-directional. Kiros refers to violence inflicted by the Israeli government and settlers “since 1917,” although Israel did not exist until 1948. Violence during the British Mandate was not simply committed by Zionists against passive Palestinians. Jews were killed in the 1920 Jerusalem disturbances and the 1921 Jaffa riots. In 1929, Arab mobs murdered 67 Jews in Hebron, destroyed an ancient Jewish community and attacked Jews in Safed. Across the 1929 violence, 133 Jews were killed.

Jewish underground organizations later committed terrorism and atrocities, and Palestinians suffered mass displacement and loss during the 1948 war. But the broader context also matters. Palestinian Arab leaders and the surrounding Arab states rejected the United Nations partition plan, and after Israel declared independence, armies from five Arab countries invaded with the objective of defeating the newly established Jewish state.

The Palestinian exodus had multiple causes. Some Palestinians were expelled by Jewish or Israeli forces; others fled combat, fear, atrocities or the collapse of local leadership; and in some places Arab authorities ordered or encouraged evacuation. It is therefore too simple either to attribute the entire refugee crisis to Israeli expulsion or to claim that Arab armies generally told Palestinians to leave.

Both histories must be confronted. But a narrative that excludes the massacre of Jews before Israel’s creation—and omits the Arab rejection of partition and invasion of the new state—cannot credibly explain the conflict as an uninterrupted chain of Palestinian resistance to Israeli violence.

The apartheid accusation also requires greater precision than Kiros provides. Serious concerns exist about Israeli rule, settlements and unequal legal systems in the West Bank. Those issues should not be minimized. But Israel’s Arab citizens vote in national elections, serve in the Knesset and judiciary, and maintain extensive religious institutions. Public information appears in Arabic as well as Hebrew and English. Hundreds of mosques operate in Israel, and state-recognized Sharia courts exercise binding jurisdiction over important Muslim personal-status matters—authority that Sharia councils in the United Kingdom do not possess.

Those realities do not prove that discrimination is absent. They do demonstrate why treating Israel proper as an exact equivalent of apartheid South Africa is misleading and why the circumstances of Arab Israeli citizens must be distinguished from those of Palestinians living under occupation.

The colonial description is incomplete for another reason. A large portion of Israel’s Jewish population descends from communities in the Middle East and North Africa, many of whose members arrived as refugees or were displaced from Arab and Muslim-majority countries. Gadi Eisenkot, currently a serious contender to replace Benjamin Netanyahu as prime minister, is the son of Moroccan Jewish immigrants. His emergence does not resolve the Palestinian question, but it illustrates why Israel cannot accurately be reduced to a white European colony imposed on the Middle East.

Finally, there is the Boulder attack. Kiros initially declined to identify it as antisemitic even after the attacker targeted a predominantly Jewish hostage-support gathering, shouted a pro-Palestinian slogan and told investigators that he wanted to kill Zionists. Even progressive Democratic leaders who agreed with Kiros on many other issues criticized her response.

People have a legal right to express even harsh, offensive and anti-Zionist views. But free speech is not immunity from moral evaluation. Nor does the First Amendment compel a private law firm to retain an employee whose public statements it concludes are incompatible with the judgment, values or client responsibilities expected of its attorneys.

Sidley Austin had the right to fire Kiros. Voters have the same right—and obligation—to judge what her letter reveals about her fitness for Congress.

Appendix B: Why Medicare for All Is the Wrong Test of Democratic Commitment

The objective of universal or near-universal health coverage should not be confused with support for one specific financing structure.

A Medicare for All system would move most health spending onto the federal budget and require correspondingly large new revenues. Households might pay less in premiums and out-of-pocket costs, but those savings would be accompanied by major changes in taxes and compensation. Employers would no longer sponsor insurance in its current form, requiring difficult decisions about whether existing employer contributions would be converted into wages, taxes or savings.

Provider payment creates another unavoidable tradeoff. Private insurers frequently pay hospitals and physicians substantially more than Medicare. Paying Medicare-like rates could reduce national health spending, but abrupt reductions would impose major pressure on hospitals and medical practices. Paying substantially higher rates would reduce disruption but greatly increase the federal cost of the program.

A single federal payer would also concentrate authority over benefits, reimbursement and medical necessity. That could produce consistency and administrative savings, but it would magnify the consequences of elections. A future administration hostile to reproductive care, gender-related treatment or other contested services would exercise enormous influence over nearly everyone’s coverage.

The practical alternative is not complacency. The existing system leaves too many people uninsured or exposed to unaffordable premiums, deductibles and medical debt.

My proposal would use catastrophic reinsurance to reduce underlying insurance costs rather than relying entirely on back-end subsidies. It would make employer contributions portable so that coverage follows the worker rather than the job. It would reform health savings arrangements to help moderate-income households manage deductibles, and it would use Medicaid more broadly where it is less expensive and more protective than heavily subsidized private coverage.

These reforms could be enacted separately, tested and adjusted. They preserve choice while directly addressing identifiable market failures.

The relevant distinction is therefore not between politicians who care about universal coverage and those who do not. It is between those who treat Medicare for All as a test of ideological virtue and those willing to do the difficult work of designing a health system that is affordable, administratively workable and politically durable.

On that test, DeGette’s legislative experience and Bird’s record of practical governance make them better choices.

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Additional Reading

Letter by Kiros

https://medium.com/@melatakiros/dear-us-law-firms-77ec63e838af

Universal Health Care Proposal by Bernstein

Should You Roll an Old 401(k) Into an IRA?

David Bernstein — Wed, 24 Jun 2026 22:58:42 GMT

Abstract: Rolling an old 401(k) into an IRA can reduce fees, consolidate scattered accounts, and provide broader investment choices. But a rollover can also eliminate penalty-free access under the rule of 55, complicate future backdoor Roth contributions, and surrender some of the stronger creditor protections associated with employer plans. The appropriate decision depends on the worker’s age, fees, tax strategy, legal exposure, and the provisions of the 401(k) plan. A rollover should therefore be treated as a consequential financial decision, not an automatic step after leaving a job.

Workers leaving an employer are often encouraged to roll their former 401(k) balance into an individual retirement account. An IRA can consolidate scattered accounts, reduce administrative and investment expenses, provide a wider range of investment choices, and prevent small former-employer accounts from being gradually depleted or forgotten. Retaining assets in a 401(k), however, can preserve penalty-free access under the rule of 55, protect the ability to make relatively tax-efficient backdoor Roth conversions, and provide stronger and more uniform protection against creditors.

The appropriate decision therefore depends on the worker’s age, account balance, investment costs, anticipated Roth strategy, need for early withdrawals, exposure to creditors, and the specific provisions of the former employer’s plan. A small, high-cost 401(k) left behind at an old employer can evaporate surprisingly quickly. Conversely, automatically moving every 401(k) into an IRA can cause the worker to surrender valuable tax and legal protections.

This comparison begins only after a worker has accumulated money in an employer plan. During the accumulation stage, however, 401(k)s generally receive advantages that ordinary IRAs do not: substantially higher contribution limits, possible employer matching contributions, and workplace systems that can automatically enroll employees and deduct contributions from each paycheck. Individuals without access to an employer-sponsored plan must rely primarily on IRAs, which ordinarily provide less contribution capacity and no employer match. An IRA may therefore be a useful destination for an existing 401(k), but it is not a fully equivalent substitute for the workplace plan that helped produce the balance.

The IRA Advantage in Reducing Fees and Preventing Stranded Accounts

The most immediate argument for transferring assets from a former employer’s 401(k) to an IRA is the opportunity to consolidate retirement savings in a carefully selected, low-cost account. Workers who change jobs repeatedly can accumulate several small 401(k) accounts, each with different investment menus, passwords, administrators, plan rules, and fees. Consolidating those balances can make it easier to monitor investments, maintain current contact and beneficiary information, and implement a coherent retirement strategy.

Small former-employer accounts are particularly vulnerable to fee erosion. A plan may impose both investment expenses calculated as a percentage of assets and fixed administrative charges that fall especially heavily on small balances. For example, a $1,000 account subject to a $100 annual administrative charge loses 10 percent of its value in the first year before considering investment performance. Even less dramatic charges can consume a substantial portion of a modest account when they continue for many years.

The cumulative effect can also be substantial for larger accounts. Research presented in How to Minimize the Impact of 401(k) Fees demonstrates that apparently small differences in annual expenses can produce very large differences in lifetime retirement wealth. A median-wage worker trapped in a high-cost plan could pay more than $100,000 in lifetime fees above the amount paid in a well-managed, low-cost plan.

The danger is not limited to fees. Former employees may move, overlook notices, lose passwords, fail to update their addresses, or simply forget that an account exists. Current law permits plans, when their governing documents allow, to remove certain former employees with small, vested balances and transfer qualifying funds to default IRAs when the participants fail to act. The receiving account is not necessarily inexpensive, and the worker may end up with another fragmented account that is difficult to locate or manage.

Inactive or abandoned retirement-related assets may also eventually become subject to state unclaimed-property procedures. When invested assets are liquidated after entering state custody, an owner who later recovers the money may receive only the value at the time of liquidation and lose the investment appreciation that would otherwise have occurred. Some owners never reclaim the assets at all. These problems are examined in greater detail in Stranded Savings: Inactive Accounts, Missing Rollovers, and the Hidden Cost of Fees.

A rollover into a deliberately chosen, low-cost IRA can address several of these problems at once. It can reduce account fragmentation, make savings easier to monitor, lower the risk that the owner will lose contact with an administrator, and replace an expensive or restrictive former-employer plan with a broader investment platform. IRAs also frequently offer greater flexibility in selecting mutual funds, exchange-traded funds, individual securities, fixed-income investments, and withdrawal arrangements.

This advantage is not universal. Some large employer plans offer institutional investments at costs below those available to individual investors. Some also provide access to stable-value funds or other investments that may not be readily available in an IRA. Conversely, an IRA managed by a high-cost adviser may impose advisory and investment expenses that exceed the cost of the former employer’s plan. The relevant comparison is therefore not between 401(k)s and IRAs in the abstract. It is between the total costs and features of the worker’s actual plan and those of a specific IRA.

The case for consolidation must also be weighed against important protections that can be lost when assets leave an employer plan.

The 401(k) Advantage Under the Rule of 55

Age 59½ is generally the point at which distributions from retirement accounts cease to be subject to the 10 percent additional tax on early distributions, although ordinary income tax and applicable plan restrictions may still apply. One important exception—the separation-from-service exception commonly called the “rule of 55”—applies to qualified employer plans but not to IRAs.

A worker who separates from an employer during or after the calendar year in which the worker turns 55 may generally take distributions from that employer’s 401(k), 403(b), or similar qualified plan without incurring the normal 10 percent additional tax. The withdrawals are penalty-free, not income-tax-free: distributions of pretax contributions and investment earnings remain subject to ordinary income tax.

Crucially, the exception does not apply to traditional IRAs. A worker who rolls the former employer’s 401(k) balance into an IRA may therefore lose access to the rule of 55 and ordinarily must wait until age 59½ to avoid the additional tax, unless another statutory exception applies.

The rule generally applies only to the plan maintained by the employer from which the worker separated during or after the qualifying year. It does not automatically apply to 401(k) accounts left at still earlier employers. A worker anticipating retirement between ages 55 and 59½ may therefore want to consider consolidating earlier employer accounts into the current employer’s plan before separating, provided that the plan accepts incoming rollovers.

The employer plan must also permit the desired form of distribution. Some plans allow former employees to make periodic or partial withdrawals, while others restrict access to a lump-sum distribution or a limited number of withdrawals. A worker contemplating use of the rule should review the plan documents before retiring or completing a rollover.

These rules create a potentially significant advantage for retaining retirement savings in a former employer’s 401(k) rather than immediately moving the balance into an IRA. A recent Wall Street Journal article by Anne Tergesen reports that workers often lose access to the rule simply because they roll their accounts into IRAs without realizing the consequence.

The 401(k) Advantage for Backdoor Roth Conversions

The tax cost of making a backdoor Roth contribution can be much lower for a taxpayer whose existing pretax retirement savings are held in a 401(k) rather than a traditional IRA.

A person with $400,000 in a 401(k) and no money in a traditional, SEP, or SIMPLE IRA can generally make a nondeductible traditional IRA contribution and promptly convert it to a Roth IRA with little or no additional taxable income, assuming the contribution has not generated investment gains. The $400,000 held in the 401(k) is excluded from the IRS pro-rata calculation.

By contrast, suppose the same person has no 401(k) balance but holds $400,000 of pretax money in traditional IRAs. The IRS aggregates the taxpayer’s traditional, SEP, and SIMPLE IRA balances with the new nondeductible contribution. The taxpayer cannot designate only the after-tax contribution as the amount being converted.

As a result, nearly the entire conversion is included in taxable income and taxed at the taxpayer’s applicable federal and state marginal rates.

This creates a significant tax preference for holding existing pretax retirement savings in a 401(k) rather than an IRA. A rollover that initially appears attractive because of lower fees or broader investment choices can make years of future backdoor Roth contributions substantially more expensive.

This disadvantage can sometimes be reversed. A taxpayer whose current employer’s plan accepts incoming rollovers may be able to move pretax IRA assets into that 401(k), removing those assets from the IRA pro-rata calculation. Whether this strategy is available depends on the terms of the employer plan.

The 401(k) Advantage in Creditor Protection

The clearest creditor-protection advantage of a 401(k) over an IRA arises outside bankruptcy. Assets held in most private-sector employer-sponsored 401(k) plans receive broad and relatively uniform federal protection under the Employee Retirement Income Security Act. ERISA’s anti-alienation provisions generally prevent ordinary judgment creditors from reaching the account, even when a creditor has successfully sued the plan participant.

Traditional and Roth IRAs do not receive comparable nationwide federal protection from creditors outside bankruptcy. Their protection depends primarily on state law and therefore varies substantially from state to state. An IRA that is fully protected from a judgment creditor in one state may receive only limited protection in another.

Limited exceptions apply to 401(k) protection. Assets may be reached pursuant to a qualified domestic-relations order, certain federal tax claims, and some federal criminal judgments. Governmental and church plans may also be governed by different legal rules because they are generally outside ERISA.

The difference between 401(k)s and IRAs is smaller in bankruptcy. Congress substantially strengthened federal IRA protection through the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Under current federal law, both 401(k) plans and IRAs receive substantial bankruptcy protection.

The protection is not identical, however. Assets remaining in an ERISA-qualified 401(k), and qualifying amounts later rolled from such a plan into an IRA, are generally protected in bankruptcy without a dollar ceiling, although the owner may need records tracing the rollover assets to the former employer plan. By contrast, amounts contributed directly to traditional and Roth IRAs, together with the earnings attributable to those contributions, are protected only up to the inflation-adjusted federal ceiling.

The distinction becomes especially important when retirement assets are inherited. In 2014, the Supreme Court ruled in Clark v. Rameker that an inherited IRA held by a non-spouse beneficiary does not qualify as the beneficiary’s protected “retirement funds” under the federal bankruptcy exemption. State law may nevertheless provide some protection.

An inherited 401(k) that remains inside an ERISA-covered employer plan may receive stronger protection, and this potential advantage is not limited to surviving spouses. In the 2021 In re Dockins decision, a federal bankruptcy court held that a 401(k) inherited by a non-spouse beneficiary was excluded from the beneficiary’s bankruptcy estate because the assets remained with the ERISA plan administrator and continued to be subject to the plan’s anti-alienation restrictions.

The crucial distinction is therefore not simply whether the beneficiary is a spouse, but whether the inherited assets remain inside the ERISA-qualified employer plan. Once the assets are distributed or transferred to an inherited IRA, ERISA protection no longer applies. A non-spouse beneficiary cannot roll the inheritance into the beneficiary’s own IRA and ordinarily must use an inherited IRA if the money leaves the employer plan.

A surviving spouse has an option unavailable to a non-spouse beneficiary. The spouse may generally roll an inherited 401(k) into an IRA in the spouse’s own name, so the account is treated as the spouse’s own retirement savings rather than as an inherited IRA. A non-spouse beneficiary cannot take this step and, if the assets leave the employer plan, must generally transfer them to an inherited IRA.

The treatment of inherited 401(k)s should nevertheless be described cautiously. In re Dockins is a lower federal bankruptcy-court decision, not a nationwide Supreme Court ruling. Even so, the case indicates that an inherited 401(k) left inside an ERISA plan may be better protected than the same assets transferred to an inherited IRA, including when the beneficiary is not the participant’s spouse.

These differences create another reason for account owners and beneficiaries to consider creditor protection before moving retirement assets out of an employer-sponsored plan.

The Decision May Change Over Time

The choice between retaining an old 401(k) and rolling it into an IRA need not have the same answer throughout a worker’s life. A worker approaching retirement at age 55 may place substantial value on preserving penalty-free access. A high-income worker making annual backdoor Roth contributions may benefit from keeping pretax balances outside the IRA system. A business owner, physician, lawyer, landlord, or other person facing meaningful litigation exposure may place greater value on ERISA creditor protection.

After the worker reaches age 59½, stops making backdoor Roth contributions, or experiences a change in legal or financial circumstances, the advantages of consolidation and lower IRA costs may become more important. Conversely, a very small 401(k) subject to high fixed fees may warrant prompt attention regardless of the worker’s longer-term strategy.

The correct approach is not to assume that an IRA rollover is always prudent or that a 401(k) should always be retained. Workers should compare the actual fees, investment options, distribution provisions, creditor protections, and tax consequences of the two accounts before acting. Automatic advice to roll every former-employer account into an IRA can be as damaging as leaving every account behind indefinitely.

Authors Note: Many aspects of the tax code put workers who must rely on IRAs because they do not have access to a 401(k) plan at a substantial disadvantage. Potential policies designed to address this problem can be found at https://www.economicmemos.com/p/tax-reconciliation-and-retirement

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Some Notes:

Fees: An analysis on this blog finds that retirement-plan fees vary widely and that small annual differences can create lifetime costs exceeding $100,000 for some workers.

Stranded Accounts: An analysis at this blog discusses fee erosion, fragmented accounts, state unclaimed-property procedures, liquidation risk, and the limitations of default rollover arrangements.

Rule of 55: The IRS confirms that the separation-from-service exception applies when separation occurs during or after the calendar year in which the participant reaches 55. The recent Wall Street Journal article emphasizes that rolling the money into an IRA can inadvertently eliminate access to the exception.

https://www.irs.gov/retirement-plans/plan-participant-employee/401k-resource-guide-plan-participants-general-distribution-rules

Backdoor Roth pro-rata rule: Form 8606 aggregates traditional, SEP, and SIMPLE IRA balances when determining the taxable portion of a conversion; employer-plan balances are not included. Kiplinger also identifies the pro-rata complication as a reason not to roll every 401(k) into an IRA.

https://www.irs.gov/instructions/i8606

IRA bankruptcy protection: The 2005 bankruptcy law created stronger federal protection for IRAs. The current inflation-adjusted ceiling of $1,711,975 became effective April 1, 2025.

https://www.ascensus.com/industry-regulatory-news/news-articles/ira-bankruptcy-exemption-increases/

Inherited IRAs” In Clark v. Rameker, the Supreme Court held that a non-spouse inherited IRA was not protected as the beneficiary’s “retirement funds” under the federal bankruptcy exemption.

https://supreme.justia.com/cases/federal/us/573/122/

Inherited 401(k)s: In In re Dockins, the bankruptcy court concluded that an inherited 401(k) remaining in an ERISA plan was excluded from the bankruptcy estate.

https://www.ncwb.uscourts.gov/sites/ncwb/files/opinions/ncwb_live.1.20.bk_.10119.14549384.0.pdf

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Too Late for 2026: New York Centrists Must Build Their Own Ballot Line for 2028

David Bernstein — Wed, 24 Jun 2026 00:42:58 GMT

Abstract: New York’s closed Democratic primaries are leaving many liberal, pro-Israel and policy-oriented voters without a political home. The candidates in the most closely watched New York City congressional races are nearly all liberal on domestic policy; the principal divisions concern Israel, allegiance to Mayor Zohran Mamdani’s political movement and the willingness to employ increasingly absolutist rhetoric against its opponents. Moderate Democrats joined by independents may constitute a larger general-election coalition, but they cannot elect a candidate whose name is absent from the November ballot. It is too late to create that alternative in 2026. For 2028, centrists must stop competing for permission to remain in the Democratic Party and organize, nominate and petition their own candidates onto the ballot from the beginning.

I. The 2026 Primaries and the Politically Homeless Middle

At this writing, the results of the June 23 congressional primaries are not yet known. But the contests have already revealed something important about the direction of New York’s Democratic Party. These are not traditional battles between liberals and conservatives. Nearly all the leading candidates are liberal on abortion, labor rights, LGBTQ protections, immigration, taxation and the social safety net. In NY-7, even candidates opposing Mamdani-backed Claire Valdez hold strongly progressive positions. In NY-10 and NY-13, the most consequential dividing line is Israel and whether candidates will join Mamdani’s effort to move the congressional delegation toward the democratic-socialist left.

Mamdani has endorsed Brad Lander against Representative Dan Goldman, Valdez for the open NY-7 seat and Darializa Avila Chevalier against Representative Adriano Espaillat. He described the American Israel Public Affairs Committee as one of the “monsters” preventing the birth of a new political world and subsequently defended that language. He did not expressly call every AIPAC donor a monster. But political organizations are made up of people, and much of AIPAC’s support comes from Jewish Americans who believe that Israel’s survival and a strong American-Israeli relationship are legitimate political objectives. Dehumanizing an organization inevitably reaches the citizens who support it.

I am what might be called a card-carrying AIPAC supporter. I also favor a pragmatic path toward improved universal health coverage, protection of Medicaid, more portable insurance and targeted assistance that helps borrowers eliminate student debt earlier in life. Yet under the political vocabulary Mamdani has introduced, support for those liberal economic objectives does not matter. Because I support AIPAC and Israel, his rhetoric places people like me among the “monsters.”

The atmosphere surrounding Goldman’s campaign illustrates the danger. Poetica Coffee served Goldman and his young daughter without initially recognizing him. The shop later refunded his purchase, announced that it did not serve “genocide enablers,” suggested that his money probably came from AIPAC and told him never to return. Mamdani eventually said that the online post went beyond ordinary political disagreement, but he stopped short of an unambiguous condemnation. A mayor who wishes to govern the entire city should have been able to say plainly that political disagreements do not justify publicly humiliating and excluding a Jewish congressman from a neighborhood business.

A relatively small number of voters in several low-turnout, safely Democratic primaries may therefore determine not only who represents New York City, but what the Democratic Party appears to stand for nationally. Candidates selected in these districts will become prominent congressional voices, while Republicans across the country will use their statements to define Democrats running in far more moderate states and districts. The consequences will extend well beyond New York.

My differences with the progressive wing also extend far beyond Israel. My paper A Durable Path Forward on American Health Care supports broader and more continuous coverage while rejecting both Republican retrenchment and the disruptive replacement of nearly all existing insurance with Medicare for All. My Third-Party Tax Reconciliation Approach to Student Debt rejects both indiscriminate debt cancellation and a repayment structure that leaves borrowers indebted into middle age or retirement. The Four Economic Questions argues that government must acknowledge scarce resources, fiscal trade-offs and the consequences of every spending decision.

These are governing questions. Too much of the progressive movement instead offers slogans, moral accusations and performative politics without workable transition plans, durable financing or serious consideration of unintended consequences. I have reluctantly concluded that the Democratic Party, as presently constituted and increasingly influenced by this movement, is not capable of governing responsibly. It is more interested in demonstrating ideological purity than in designing policies that can be enacted, financed and sustained.

II. Why It Is Too Late for 2026

New York does not categorically prohibit a defeated primary candidate from continuing on another ballot line. The candidate must ordinarily have secured that line before the primary. Independent nominating petitions for the 2026 general election had to be filed between May 19 and May 26, almost a month before the June 23 primary.

A defeated Democrat also has no general right to seize an existing minor-party nomination after the votes are counted. A lawful substitution requires a recognized vacancy and compliance with additional election-law procedures. A write-in campaign remains technically possible, but it is not a realistic substitute for appearing on the printed ballot.

Goldman and other non-Mamdani candidates may still win. The structural lesson remains unchanged. A centrist who loses the Democratic primary without securing another line beforehand has no practical route back onto the November ballot.

For 2026, the opportunity has passed.

III. New York’s Third-Party Precedent

New York has a long history of consequential minor-party candidacies. The clearest precedent is James L. Buckley’s 1970 Senate victory. Running on the Conservative Party line, Buckley won a three-way contest with approximately 39 percent of the vote, defeating Democratic nominee Richard Ottinger and Republican incumbent Charles Goodell.

Buckley was not a centrist, but his victory demonstrated the relevant electoral principle. When the two major-party nominees leave a substantial portion of the electorate politically homeless, a well-organized third candidate can win New York with a plurality.

IV. The 2028 Centrist Imperative

Centrists must begin building a statewide political organization now. It will need a recognizable identity, legal counsel, financing, professional petition operations, congressional-district organizations and a credible process for selecting candidates. Most important, its candidates must commit to the independent line from the outset rather than treating it as insurance after losing a Democratic primary.

The first objective should be to return safely Democratic House seats to pragmatic representation by appealing to moderate Democrats, pro-Israel liberals, independents and center-right voters who cannot support either democratic socialists or many Republican nominees.

The second objective should be the 2028 Senate election. If Representative Alexandria Ocasio-Cortez seeks and wins the Democratic nomination, a credible centrist could compete against her and the Republican nominee in a three-way race. The centrist would not need 50 percent. A coalition of politically homeless Democrats, independents and moderate Republicans could win a plurality.

Mamdani’s movement understands that political power belongs to those who organize before the election. In 2026, centrists waited to learn whether they had lost the Democratic primaries before considering alternatives. In 2028, they must stop asking the Democratic Party to take them back and place their own candidates on the ballot from day one.

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The Independent Congressional Blueprint: Winning the Squeezed Middle Class

David Bernstein — Mon, 22 Jun 2026 22:51:57 GMT

This blog post provides a comprehensive, trial-ready speech inventory (SP-2601) designed for an independent, third-party congressional candidate.

By upgrading to a paid subscription, you get a speech which succinctly explains The Third-Party Economic Platform.

The speech today:

Provides a complete, multi-sector policy platform spanning healthcare, student debt, education, and retirement.
Establishes a unique rhetorical lane that rejects both Republican gridlock and progressive overreach.
Introduces an innovative, market-driven K-12 “Course Choice” framework to disrupt institutional monopolies.
Delivers a detailed 7-pillar tax reconciliation model designed to shield the squeezed middle class from systemic inflation.
Connects immediate household balance-sheet relief to the long-term structural survival of Social Security.
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Thank you all for being here.

We are standing at a crossroads—not just in this district, but across our entire nation.

How 153 Voters Could Have Changed Maine’s 2nd District

David Bernstein — Mon, 22 Jun 2026 21:05:42 GMT

Abstract: Matt Dunlap won the Democratic nomination in Maine’s 2nd Congressional District after surviving Jordan Wood by only 304 votes at the decisive elimination point. A shift of just 153 voters could have produced a different nominee, and the result offers an important preview of November’s contest against former Governor Paul LePage—and of the opening ranked-choice voting might create for a credible independent.

Matt Dunlap’s victory in the Democratic primary for Maine’s 2nd Congressional District offers an unusually clear illustration of both the advantages and the peculiarities of ranked-choice voting.

Dunlap appeared to be running third in early election-night returns. But those returns were incomplete. Once all first-choice votes were counted, the official first round was:

Joe Baldacci: 24,966
Matt Dunlap: 22,933
Jordan Wood: 22,712
Paige Loud: 8,194

Baldacci finished first, but with less than one-third of the vote. Because no candidate received a majority, the ranked-choice process began.

Loud was eliminated first. After her ballots were transferred to each voter’s next available choice, the remaining candidates stood at:

Baldacci: 25,923
Dunlap: 25,681
Wood: 25,377

Only 546 votes separated first place from third.

More importantly, Dunlap led Wood by just 304 votes.

Wood was therefore eliminated. His supporters strongly preferred Dunlap to Baldacci: 10,243 of Wood’s ballots transferred to Dunlap, while 6,632 transferred to Baldacci. Another 8,502 Wood ballots did not contain a continuing preference for either finalist.

The result was:

Matt Dunlap: 35,924
Joe Baldacci: 32,555

Dunlap won with approximately 52.5 percent of the votes remaining in the final round.

That explains how Dunlap won. But it does not fully capture how close the race came to following an entirely different path.

The Decisive 304-Vote Margin

Suppose that 153 voters counted for Dunlap at the decisive stage had instead supported Wood.

Each switched vote would subtract one from Dunlap and add one to Wood, changing the difference between them by two votes. A shift of 153 voters would therefore have erased Dunlap’s 304-vote advantage and placed Wood narrowly ahead.

The approximate totals would then have been:

Baldacci: 25,923
Wood: 25,530
Dunlap: 25,528

Dunlap—not Wood—would have been eliminated.

The later preferences of Dunlap’s supporters would then have determined whether Baldacci or Wood won the nomination.

Wood would have entered that hypothetical final round only 393 votes behind Baldacci. Among Dunlap ballots that ranked remaining candidate, Wood would have needed to receive only 394 more transfers than Baldacci to move ahead.

That would not have required an overwhelming preference for Wood. A relatively even division, tilted modestly toward Wood, could have made him the nominee.

Would Wood Have Won?

There are reasons to believe that Wood would have had a strong chance.

Wood, Dunlap and Loud all ran to Baldacci’s left and supported Medicare for All. They also criticized the Democratic establishment’s support for Baldacci. When Wood was eliminated, his supporters preferred Dunlap to Baldacci by a substantial margin.

It is therefore plausible that Dunlap’s voters would have reciprocated by preferring Wood to Baldacci.

But the available totals do not prove that conclusion.

Voters do not rank candidates solely along a left-to-right ideological scale. Biography, geography, age, political experience, personality and perceptions of electability can all affect second choices.

Dunlap and Baldacci were both familiar Maine officeholders with strong roots in the Bangor–Old Town area. Dunlap had served as secretary of state, state auditor and a state legislator. Baldacci was a lawyer, former Bangor city councilor and state senator.

Wood, by contrast, was a younger former congressional staffer from Auburn who had worked as chief of staff to California Representative Katie Porter. Some Dunlap voters may have been ideologically closer to Wood but culturally or institutionally more comfortable with Baldacci.

The public round totals show how Wood’s voters divided between Dunlap and Baldacci. They do not show how Dunlap’s voters would have divided between Wood and Baldacci.

The appropriate conclusion is therefore not that Wood certainly would have won. It is that Wood might well have won, and that an extraordinarily small change in the vote would have tested a completely different final matchup.

What This Says About Ranked-Choice Voting

Ranked-choice voting is often described as a system that identifies the candidate with the broadest support.

In one important sense, it accomplished that goal. When Dunlap and Baldacci became the finalists, Dunlap received most of the ballots that continued into the final round.

But ranked-choice voting does not compare every candidate directly against every other candidate.

It follows a sequence. The lowest candidate is eliminated in each round, and that elimination determines which comparison occurs next.

The Maine count eventually compared Dunlap with Baldacci. It never produced a Wood–Baldacci final or a Wood–Dunlap final.

Wood’s 304-vote deficit prevented those comparisons from taking place.

The outcome was therefore path dependent. A very small change in the elimination order could have created a different final pairing and possibly a different winner.

That is not necessarily an argument against ranked-choice voting. Every electoral system has rules that become decisive in close contests.

Under ordinary plurality voting, Baldacci would have won despite receiving less than one-third of the first-choice vote. Ranked-choice voting instead produced a nominee supported by most of the active final-round ballots.

But the phrase “majority winner” requires some qualification. It does not always identify the only candidate who could have assembled a majority. It identifies the candidate who assembled a majority after a particular sequence of eliminations.

Matt Dunlap won under Maine’s established rules. Yet a shift of fewer than two-tenths of 1 percent of the ballots could have eliminated him—and might have made Jordan Wood the Democratic nominee.

November: A Two-Candidate Race—For Now

Dunlap will now face former Republican Governor Paul LePage in the general election.

The contrast is unusually sharp.

Dunlap has identified Medicare for All as one of the policies he intends to advance. LePage, during his years as governor, repeatedly opposed Medicaid expansion and resisted implementing it even after Maine voters approved expansion in a statewide referendum.

That leaves substantial political space between the two candidates.

It is disappointing that voters currently have no centrist or pragmatic option to succeed Jared Golden, whose political appeal rested in part on his willingness to depart from national party orthodoxy. The district is now being offered a much sharper ideological choice at a time when many voters may prefer continuity, moderation and practical problem-solving.

A pragmatic independent could reject both the Republican impulse to reduce public health care assistance and the Democratic proposal to replace most existing insurance with Medicare for All. Such a candidate could support improved universal coverage while preserving private insurance, state exchanges, employer contributions and individual choice.

That middle-ground position is developed in my recent speech, Beyond Medicaid Cuts and Medicare for All. It is written for an independent or third-party congressional candidate running against a Republican who favors reducing health care assistance and a Democrat who supports Medicare for All.

Maine’s 2nd District would appear to offer a particularly interesting setting for such a candidacy.

The relevant standard is not whether an organized minor party has nominated someone. Organized third parties rarely win congressional elections. The more important question is whether a credible individual—with a substantive career, a strong local reputation and the personal standing to compete with the major-party nominees—could finish among the top two.

Under Maine’s ranked-choice system, such a candidate would not necessarily be a spoiler.

Suppose a credible independent finished second in first-choice votes. The third-place major-party candidate would be eliminated, and that candidate’s later preferences could propel the independent to victory.

The Democratic primary demonstrated the basic mechanism. Dunlap did not begin in first place. He won because he survived the elimination round and then received enough support from Wood’s voters to pass Baldacci.

A third candidate in November could follow a similar path—but only by reaching second place. A candidate finishing third would be eliminated and could affect the result only through the later preferences of that candidate’s supporters.

At present, however, no third candidate has qualified for the printed ballot in Maine’s 2nd Congressional District. The official nonparty candidate list contains no congressional candidate, and neither the Green Independent Party nor the Libertarian Party nominated one.

A declared write-in candidate can still enter by August 25. Such a candidacy would trigger ranked-choice voting in the federal race, but the candidate would face the enormous disadvantage of having no name printed on the ballot. Building the recognition and organization needed to finish second as a write-in would be exceptionally difficult.

Unless such a candidate emerges, November will be a direct Dunlap–LePage contest, and no ranked-choice redistribution will be required.

LePage enters the general election with significant advantages. He carried the 2nd District during his unsuccessful statewide campaign for governor in 2022, and Donald Trump carried the district by approximately nine points in 2024. National Republicans regard the open seat as one of their strongest opportunities to gain a Democratic-held district.

Dunlap must unite a Democratic electorate that was deeply divided in the primary while persuading independent voters that his progressive positions are compatible with the needs of a politically mixed and largely rural district. His success in attracting Wood’s later-choice voters demonstrates an ability to assemble a coalition within the Democratic primary. In a two-person general election, however, there may be no later rounds and no transferred votes to rescue either candidate.

The primary showed how a few hundred votes can determine not only who survives a ranked-choice count, but which political coalition is given the opportunity to form a majority. The general election will determine whether Dunlap can build a broader coalition against one of Maine’s best-known—and most polarizing—political figures.

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Beyond Medicaid Cuts and Medicare for All

David Bernstein — Mon, 22 Jun 2026 20:00:44 GMT

This speech translates the health care framework in A Durable Path Forward on American Health Care into the language of a congressional campaign. It contrasts a practical reform agenda based on lower premiums, portable coverage, improved savings vehicles, and targeted public assistance with Republican retrenchment and the Democratic promise of Medicare for All.

The following speech is written for a third-party candidate running for Congress who proposes a pragmatic path toward improved universal health coverage in the United States. It contrasts that approach with a Republican agenda centered on reducing federal health care assistance and a Democratic opponent who supports replacing the existing system with Medicare for All.

The speech translates the policy framework developed in my new paper, A Durable Path Forward on American Health Care, into the language of a congressional campaign. The paper explains the proposal in greater technical detail, including its four mutually reinforcing reforms: catastrophic reinsurance, portable employer contributions, modernized Health Savings Accounts and Flexible Spending Accounts, and a more efficient role for Medicaid.

The speech does five things:

Rejects the false choice between government withdrawal and complete government control. It argues that Americans should not have to choose between cutting Medicaid and ACA assistance or replacing nearly all existing coverage with a single federal program.
Presents a practical path toward universal coverage. The proposal combines catastrophic reinsurance, portable employer contributions, improved premium tax credits, FSA and HSA reform, and expanded Medicaid and CHIP eligibility.
Explains how the reforms work together. Rather than treating each proposal as an isolated initiative, the speech shows how lower premiums, portable coverage, smoother subsidies, and public insurance for lower-income households reinforce one another.
Connects health insurance to household financial security. Continuous and affordable coverage helps families avoid medical debt, preserve emergency savings, change jobs, start businesses, and save for retirement.
Offers a different philosophy of governing. The candidate supports the complete plan but invites Congress to examine, improve, and enact individual provisions rather than insisting that every reform be accepted at once.

The full speech appears below.

Good evening and thank you for being here.

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