The Donkiphant: AI generated image for David Bernstein 2026

This race-by-race forecast examines 35 House battlegrounds and projects 18 holds, 6 Democratic pickups, and 6 Republican pickups, with 5 races unresolved. The projected flips cancel out, so control in this forecast depends on both the unresolved races and the accuracy of the predicted holds. Can…

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Current rules restrict Series I savings bonds to TreasuryDirect accounts with a $10,000 annual cap, locking them out of tax-advantaged 401(k)s and IRAs where most households accumulate wealth. Using a 100,000-path simulation, this analysis shows that allowing a modest I-bond allocation inside retirement accounts provides meaningful downside protection against sequence-of-returns risk during severe inflation shocks by eliminating the duration risk inherent in traditional bond funds.

This analysis considers changes to the rules governing purchases of Series I savings bonds and the portfolio decisions those changes could make possible.

Currently, individuals purchase I bonds through TreasuryDirect, subject to a $10,000 annual purchase limit per person. I bonds are not a standard investment option within IRAs or 401(k) plans. While some plans offer TIPS funds, pooled funds carry perpetual duration risk and lack a fixed maturity date, exposing retirees to mark-to-market losses during rate spikes. Individual Treasury laddering is rarely available in standard plan menus. For a deeper examination of how I bonds compare to TIPS and their unique structural advantages, see this prior analysis on Series I Bonds and Practical Guidance.

The proposed policy options are to allow Series I savings bonds inside tax-advantaged retirement accounts, increase allowable purchases, or do both. Allowing purchases within retirement accounts is the substantive change: it gives households that save primarily through retirement plans access to a non-marketable, zero-floor inflation hedge without interest-rate or duration risk. Increasing purchase limits alone leaves this access barrier intact.

The analysis examines how three portfolios affect retirement wealth and risk under ordinary inflation conditions and conditions with larger inflation shocks. The all-stock portfolio provides a benchmark for assessing the protection offered by traditional bonds; comparing the two balanced portfolios isolates the effect of replacing some traditional bonds with I bonds.

• Initial wealth: $1,000,000 for each retiree.

• Withdrawals: $40,000 in year one, paid monthly at approximately $3,333.33. Retirement starts in February; payments rise 3% each subsequent February. Total scheduled withdrawals over ten years are $458,555.

• Portfolio one: 100% S&P 500.

• Portfolio two: 60% S&P 500 and 40% broad U.S. investment-grade bonds.

• Portfolio three: 60% S&P 500, 30% broad U.S. investment-grade bonds, and 10% Series I savings bonds.

• Base inflation scenario: annual inflation averages approximately 3%, with a standard deviation of 1.5 percentage points. Inflation is persistent and positively skewed, allowing occasional large increases.

• Larger inflation shocks scenario: the inflation-shock scale doubles, increasing the annual inflation standard deviation to approximately 3 percentage points while average inflation remains near 3%. Large positive inflation surprises impose disproportionately greater losses on traditional bonds.

• Rebalancing: compare resetting each portfolio to its original weights every February with allowing weights to drift. In the base inflation scenario, rebalancing reduces the spread of outcomes for both balanced portfolios, raising median and 10th-percentile wealth while lowering 90th-percentile wealth. It has no effect on the 100% S&P 500 portfolio.

• Outcomes: report the worst simulated ending balance and the 1st, 10th, 25th, 50th, 75th, and 90th percentiles for every portfolio. These results show both protection against low ending balances and wealth forgone when investment outcomes are favorable.

Key Findings

The largest reduction in downside risk comes from moving from an all-stock portfolio to either balanced portfolio, at the cost of substantial upside. Replacing some traditional bonds with non-marketable I bonds provides additional protection at the lowest percentiles—particularly during rate spikes that hurt traditional bond funds—with little change at the 25th percentile and generally lower median and upper-percentile wealth.

• All-stock benchmark: with annual rebalancing under base inflation, 10th-percentile wealth is approximately $493,000 for all stocks, compared with $677,000 for 60/40 and $680,000 for 60/30/10. All stocks produce higher median wealth—$1,233,000 versus $1,169,000 and $1,162,000—and much higher 90th-percentile wealth: $2,758,000 versus $1,959,000 and $1,937,000.

• Incremental effect of I bonds: relative to 60/40, the rebalanced I-bond portfolio adds approximately $5,400 at the 1st percentile and $2,600 at the 10th, but reduces median wealth by $6,300 and 90th-percentile wealth by $22,300.

• Larger inflation shocks: the rebalanced I-bond portfolio’s advantage over 60/40 increases to approximately $26,900 at the 1st percentile and $17,700 at the 10th. Median wealth is approximately unchanged, while 90th-percentile wealth remains $27,400 lower.

• Rebalancing: in the base case, annual rebalancing reduces the spread of outcomes for both balanced portfolios, raising median and 10th-percentile wealth while lowering 90th-percentile wealth. By definition, rebalancing has no effect on the all-stock portfolio.

Methods

The analysis uses 100,000 simulated market paths, each covering 120 months. Withdrawals occur at the beginning of each month and increase by 3% each February. All portfolios experience the same market conditions. Taxes and management fees are excluded to isolate core risk dynamics; holding I bonds inside tax-deferred accounts eliminates annual interest tax drag relative to taxable holdings.

In the base case, annual stock returns have an assumed arithmetic mean of 8% and standard deviation of 18%. Traditional bond returns have an assumed arithmetic mean of 4.5% and standard deviation of 6%. These are illustrative assumptions rather than historical estimates.

Inflation is modeled using a mixture of gamma shocks with shape parameter 2 and normal shocks. The gamma component has a weight of 0.85, and annual persistence is 0.40. The base process averages 3% inflation with a standard deviation of 1.5 percentage points and simulated skewness of approximately 0.77. The larger-inflation-shocks scenario doubles the scale of inflation fluctuations, raising the standard deviation to approximately 3 percentage points while average inflation remains near 3%. This scenario tests greater inflation uncertainty and more severe inflation surprises, rather than persistently higher average inflation.

Positive inflation surprises hurt traditional bonds more than stocks, with an additional bond-return penalty for large positive surprises. In the larger-shocks scenario, these effects reduce the simulated average traditional bond return to approximately 4.1% and increase its standard deviation to approximately 8.6%.

I bonds have an assumed fixed component of 0.9%, combined with lagged six-month inflation adjustments and a zero floor on the composite interest rate. Unlike TIPS or market bonds, I bonds cannot trade below par when yields spike. A separate sensitivity check sets the fixed component to zero.

Withdrawals come proportionately from all holdings. Each portfolio is evaluated with annual February rebalancing to its original weights and without rebalancing, allowing weights to drift. The principal simulations assume that the proposed rule changes permit both the initial I-bond allocation and subsequent purchases needed for rebalancing.

Results

Holding bonds substantially improves protection against low ending balances compared with an all-stock portfolio, while sacrificing considerable wealth when markets perform well. Replacing some traditional bonds with I bonds provides a smaller additional cushion in the base case and stronger protection when inflation shocks are larger.

The severe downside outcomes at the lowest percentiles are driven by sequence of returns risk: when market downturns or inflation spikes strike during the first few years of retirement, forced withdrawals lock in permanent capital losses. Non-marketable I bonds buffer this vulnerable window because their underlying principal cannot suffer mark-to-market impairment.

Base Inflation Scenario

Under base inflation, the principal benefit of I bonds appears at the lowest percentiles. Median and upper-percentile wealth are slightly lower than for 60/40, while the 25th percentile is nearly unchanged with annual rebalancing.

• Worst simulated outcome: with annual rebalancing, the all-stock portfolio reaches zero, compared with minimum balances of approximately $126,000 for 60/40 and $134,000 for 60/30/10. The all-stock portfolio exhausts its assets in 28 of 100,000 paths. These are model-dependent results, and the minimum for each portfolio need not occur on the same path.

• 1st and 10th percentiles: all stocks leave approximately $186,000 and $493,000; 60/40 leaves $419,000 and $677,000; and 60/30/10 leaves $425,000 and $680,000. Most of the protection comes from holding bonds, with I bonds providing a modest additional benefit.

• 25th percentile: all stocks leave approximately $781,000, compared with approximately $882,000 for either balanced portfolio. The difference between the balanced portfolios is less than $400.

• Median: all stocks leave approximately $1,233,000, compared with $1,169,000 for 60/40 and $1,162,000 for 60/30/10. Replacing traditional bonds with I bonds reduces median wealth by approximately $6,300.

• 75th and 90th percentiles: all stocks leave approximately $1,904,000 and $2,758,000; 60/40 leaves $1,543,000 and $1,959,000; and 60/30/10 leaves $1,528,000 and $1,937,000. The I-bond allocation reduces wealth relative to 60/40 by approximately $15,000 and $22,300.

• Without rebalancing: relative to 60/40, I bonds add approximately $15,000 at the 1st percentile and $2,400 at the 10th. They reduce wealth by approximately $3,200 at the 25th percentile, $8,500 at the median, $11,900 at the 75th percentile, and $10,900 at the 90th.

• Effect of rebalancing: annual rebalancing reduces the spread of outcomes for both balanced portfolios. It raises median and 10th-percentile wealth but lowers 90th-percentile wealth. For 60/30/10, median wealth rises from approximately $1,133,000 without rebalancing to $1,162,000 with rebalancing, while 90th-percentile wealth falls from $2,033,000 to $1,937,000. Rebalancing has no effect on the all-stock portfolio.

Larger Inflation Shocks Scenario

Greater inflation uncertainty weakens the protection provided by traditional bonds—and pooled bond funds susceptible to duration losses—making the I-bond allocation more valuable at the low end. Average inflation remains near 3%; the change is greater variability and more severe inflation surprises.

• Worst and 1st-percentile outcomes: with annual rebalancing, all stocks leave $0 and approximately $185,000; 60/40 leaves $42,000 and $373,000; and 60/30/10 leaves $119,000 and $400,000. The I-bond portfolio provides stronger protection against very low ending balances.

• 10th and 25th percentiles: all stocks leave approximately $493,000 and $780,000; 60/40 leaves $641,000 and $851,000; and 60/30/10 leaves $659,000 and $862,000. I bonds improve these outcomes relative to 60/40 by approximately $17,700 and $10,900.

• Median: all stocks leave approximately $1,233,000. The balanced portfolios have effectively equal medians: approximately $1,146,000 for 60/40 and $1,147,000 for 60/30/10.

• 75th and 90th percentiles: all stocks leave approximately $1,907,000 and $2,763,000; 60/40 leaves $1,526,000 and $1,958,000; and 60/30/10 leaves $1,516,000 and $1,931,000. The I-bond portfolio still gives up approximately $9,900 and $27,400 relative to 60/40.

• Without rebalancing: I bonds improve the 1st, 10th, and 25th percentiles relative to 60/40 by approximately $45,800, $19,400, and $6,400. They reduce median wealth by approximately $5,400 and the 75th and 90th percentiles by $10,900 and $14,200.

• Overall stability: I bonds reduce the standard deviation of ending wealth relative to 60/40 by approximately 3.5% with annual rebalancing and 1.7% without rebalancing. The corresponding reductions under base inflation are approximately 1.9% and 0.7%. Their stabilizing contribution is therefore greater when inflation shocks are larger.

Conclusion

The current retirement architecture forces a strange compromise on American savers: households can save hundreds of thousands of dollars tax-free in employer-sponsored plans, but the asset best engineered to protect their baseline standard of living against inflation spikes remains trapped behind an arbitrary $10,000 annual purchase cap on an isolated Treasury website.

As this analysis demonstrates, incorporating non-marketable Series I savings bonds into retirement accounts provides targeted insurance against worst-case retirement outcomes. By eliminating duration risk and guaranteeing a floor on nominal principal, a modest 10% allocation meaningfully cushions sequence-of-returns risk during severe inflation shocks—precisely when traditional market-traded bonds fail to provide safety.

Simply raising the individual TreasuryDirect cap offers little help to the vast majority of Americans whose investable wealth resides inside 401(k)s and IRAs. A true modern retirement framework should align public policy with household security by opening plan access to non-marketable Treasury inflation hedges, giving retirees the option to buy tailored downside stability when they need it most.

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I am in the process of separating my economics and finance writing from my political commentary. Economics and finance will remain on Substack; my political writing is moving to Medium. Follow me on Medium for more political analysis.

The migration begins with four essays:

· A Resident’s Guide to Colorado Politics

· Will Republicans Flip Minnesota?

· Maine Could Tip Congress and Its Center of Gravity

· An Open Letter to Michigan Voters: Why This Centrist Supports Mike Rogers

I’ll start with Colorado, where I live. The state is not a major battleground in 2026. CO-08 is the one true toss-up, although Jessica Killin and Eileen Laubacher could flip Republican seats if a blue wave develops.

The larger story is how the state is changing. Democrats have moved sharply left, the political center is vanishing, and two safely Democratic congressional districts have no scheduled debates. Independent Senate candidate Bob Chew offers some hope for voters seeking a credible alternative.

I expect this movement toward the fringes to accelerate. By 2028, I fear Colorado and New York could have Senate contests in which neither major party nominates someone acceptable to centrists. Chew’s candidacy offers an opportunity to begin building a political center now. Voters who want meaningful choices may need to organize independent movements—or their own parties—soon after the 2026 election.

Minnesota offers an early look at this problem. The Democrats have nominated far-left candidates for the Senate and the Second Congressional District. The Republican nominees are burdened by Trump’s high unfavorable ratings in this Democratic-leaning state, but an upset is possible.

Maine could help determine control of Congress and, more importantly, the degree of polarization within it. Paul LePage, the Republican nominee for ME-02, was MAGA before Trump. If elected, he would replace retiring Congressman Jared Golden, an effective centrist. Troy Jackson, a candidate favored by the far left of the Democratic Party, would, if elected, replace Senator Susan Collins, who has tempered her party’s more extreme proposals.

Michigan’s Senate race has prompted me to cross party lines to support Mike Rogers over Abdul El-Sayed. Read the open letter to Michigan voters to understand why?

All four essays on Medium are free to read through the links in this article. Enjoy!

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Israel votes on October 27, 2026. Voters elect the 120-member Knesset rather than the prime minister directly. They choose a ranked candidate list representing one party or an alliance of parties. Seats are allocated proportionally: a list winning ten seats sends its first ten candidates to parliament. To enter the Knesset, a list must receive at least 3.25% of the national vote.

After consulting the parties, the president assigns a Knesset member the task of forming a government, initially allowing 28 days, potentially extended by 14. The largest party does not automatically secure the premiership: the decisive question is who can assemble a government with parliamentary support, with 61 seats providing a working majority.

The election therefore raises three distinct questions:

• Can Benjamin Netanyahu’s opponents replace him?

• Can they form a durable government?

• How much would a change in leadership alter security policy given Israel’s perilous security situation?

Removing Netanyahu could produce consequential changes in governance and military strategy, but expectations of a fundamental security-policy reversal deserve skepticism.

Israel’s major parties and alliances differ over security, Palestinian statehood, religion, democratic institutions and economic policy:

Likud — Netanyahu: Nationalist right; military strength, settlement support and limits on judicial power.

Together — Bennett and Lapid: Alliance of the nationalist right and secular center, united against Netanyahu but divided over Palestinian statehood.

Yashar — Eisenkot: Security-oriented center; competent government, accountability and national cohesion.

Blue and White — Gantz: Centrist; national security and institutional stability.

The Democrats — Golan: Social democratic left; stronger social protections, judicial independence and a negotiated Palestinian settlement.

Yisrael Beiteinu — Lieberman: Secular nationalist right; hawkish security policies and opposition to ultra-Orthodox military exemptions.

Shas: Sephardi and Mizrahi ultra-Orthodox interests; religious education, welfare and military exemptions.

United Torah Judaism: Ashkenazi ultra-Orthodox interests; religious institutions, public funding and military exemptions.

Jewish Power — Ben-Gvir: Far-right Jewish nationalism; harsher security measures and expanded Jewish sovereignty.

Religious Zionism–Zehut — Smotrich and Feiglin: Religious nationalist far right; settlement expansion, annexation and opposition to Palestinian statehood.

Ra’am — Abbas: Islamist Arab party; practical gains for Arab citizens through cooperation with Jewish parties.

The Joint List: Arab nationalist and Arab–Jewish left-wing alliance; equal citizenship, Palestinian rights and opposition to occupation.

Smaller lists matter because crossing the 3.25% threshold can change the coalition arithmetic, while votes for parties that fall short produce no parliamentary representation.

Opposition to Netanyahu crosses ideological boundaries. Agreement on replacing him does not necessarily translate into agreement on how to govern. Reuters’ October 7 polling update, using data through October 5, projects approximately 64 seats for parties opposing Netanyahu and 51 for his supporters.

Recent polls place Gadi Eisenkot’s Yashar narrowly ahead of Netanyahu’s Likud: an October 4 Kan survey projected 23 seats for Yashar and 21 for Likud, while a recent Maariv poll favored Eisenkot over Netanyahu as prime minister, 47% to 41%. Yet leading the polls does not guarantee the premiership. Israel’s fragmented party system, the 3.25% threshold for entering the Knesset and disagreements over coalition partners make assembling a 61-seat governing majority considerably harder to predict than which party will finish first.

Three figures have the clearest paths to the premiership — Benjamin Netanyahu, Gadi Eisenkot and Naftali Bennett — while other prominent leaders could emerge through coalition bargaining.

Benjamin Netanyahu: Israel’s longest-serving prime minister, a former finance minister, UN ambassador and special-forces soldier. His brother Yoni died leading the 1976 Entebbe hostage rescue. A skilled political survivor and security hawk, Netanyahu combines extensive governing experience with deep controversy over judicial reform, his corruption trial and responsibility for October 7.

Gadi Eisenkot: Former IDF chief of staff and wartime cabinet minister, now leading Yashar. Born in Israel to Moroccan Jewish immigrants, he would become the country’s first Mizrahi prime minister — representing Jews with roots in the Middle East and North Africa. His son Gal and two nephews were killed fighting in Gaza. He presents himself as a sober, security-minded alternative to Netanyahu, emphasizing accountability, competent government and national cohesion.

Naftali Bennett: Prime minister in 2021–22 and previously economy, education and defense minister. A former special-forces officer and successful technology entrepreneur, he brings substantial business and executive experience. He is a pragmatic coalition builder but remains a nationalist hawk opposed to Palestinian statehood.

Other prominent leaders could influence coalition negotiations or emerge as compromise candidates.

Yair Lapid, a former journalist, prime minister, finance minister and foreign minister, is a secular centrist who helped assemble the coalition that displaced Netanyahu in 2021.

Benny Gantz, a former military chief, defense minister and alternate prime minister, brings substantial security experience. Gantz left Netanyahu’s emergency government in June 2024, accusing him of allowing political considerations to obstruct strategic decisions and failing to establish a clear postwar plan for Gaza.

Avigdor Lieberman, a Soviet-born immigrant and former defense, foreign and finance minister, combines secular nationalism with a hard security line. He resigned as defense minister in November 2018 because he regarded Netanyahu’s ceasefire with Hamas as capitulation — an objection to excessive accommodation, whereas Gantz’s departure centered on deficient strategy and leadership.

Yair Golan, the Democrats’ leader and a former deputy military chief who rescued civilians during the October 7 attacks, represents the social democratic left. These figures could help determine who governs, even if none becomes prime minister.

Arab citizens vote, serve in the Knesset and can help determine who governs Israel; there is no legal requirement that the prime minister be Jewish. Ra’am, led by Mansour Abbas, is the most plausible Arab coalition partner: it joined the Bennett–Lapid government in 2021 and emphasizes practical improvements for Arab communities.

The Joint List, combining Hadash, Ta’al and Balad, could instead support an anti-Netanyahu minority government from outside the coalition. Ahmad Tibi has signaled openness to parliamentary cooperation, while the alliance’s backing would depend on negotiations over its demands.

Jewish–Arab cooperation also has advocates among the Jewish left. Yair Golan supports including Ra’am in the next government, although this is his Democrats’ position rather than an agreement among opposition leaders.

Reuters has also reported on A Place for Us All, a new Jewish–Arab party founded by leaders of Standing Together, seeking to mobilize younger and disillusioned voters. Its challenge is clearing the electoral threshold without fragmenting the opposition vote.

Arab parties could become decisive if Netanyahu’s opponents fall short of a governing majority without them. They could supply coalition seats, negotiate outside support for a minority government, or cooperate on specific parliamentary votes. Political barriers remain substantial:

Eisenkot has rejected including Ra’am, and Lieberman opposes such a partnership. A viable arrangement would therefore require some opposition leaders to reconsider their positions or accept a negotiated form of outside support. An anti-Netanyahu parliamentary majority would not automatically become a governing majority.

Arab citizens of Israel can vote in competitive parliamentary elections, elect their own parties and influence government formation, although opposition to Arab coalition participation is a significant obstacle.

A direct comparison with Jewish participation in neighboring countries is limited because Jordan and Saudi Arabia have very small, poorly documented Jewish populations. Iran retains a longstanding Jewish community, estimated at approximately 8,500 in 2025, with a reserved parliamentary seat, but its members face substantial discrimination and intimidation within an electoral system tightly controlled by the regime. (There are reasons why so few Jewish people exist in Islamic countries.)

My assessment is that a fragile coalition or prolonged bargaining is more likely than a decisive, durable governing majority.

Expectations of a drastic security-policy reversal or an immediate diplomatic breakthrough stemming from the election are overblown. Israel’s next prime minister will inherit the same neighborhood:

Israel faces a depressingly long list of security challenges: Iran’s missiles, unresolved nuclear ambitions and armed allies; Hamas and Palestinian Islamic Jihad in Gaza; Hezbollah in Lebanon; the Houthis in Yemen; Iran-backed militias in Iraq; extremist networks and violence against minorities in Syria; Turkey’s hostility and expanding regional influence; popular hostility and antisemitism in Egypt and Jordan despite their peace treaties; and a Palestinian conflict with no settlement approaching.

Israel’s deteriorating relations with much of the world add another challenge. Netanyahu’s inept diplomacy and political choices bear substantial responsibility. His resistance to an independent state commission investigating October 7 — comparable to the Agranat Commission established after the 1973 war — also undermines accountability. In my view, he should go. But I live in Denver; the decision belongs to Israeli voters.

A successor could improve military strategy, restrain settlement expansion and strengthen diplomacy. Those would be consequential changes, but Israel’s adversaries will not retire when Netanyahu does. The election may change how Israel manages its security challenges more than its determination to confront them.

Author’s note: Israeli voters have reason to watch America’s elections closely, particularly the Senate race in Michigan. In my open letter to Michigan voters, I explain why Abdul El-Sayed’s positions on Israel and his evasiveness about Iran lead this usually Democratic voter to support Republican Mike Rogers. My concern is that Israeli voters will hear a larger message: even defensive support from their American ally may depend on who wins the next election.

The uncertainty extends across the political spectrum. Trump’s hesitation about joining Saudi Arabia’s military response after the deadly attacks on Riyadh’s airport reinforces my concern about the reliability of American commitments. For Israelis choosing their next government, the conclusion may be uncomfortable but unavoidable: we must stand on our own two feet; we cannot assume our ally will always come to our defense.

Reading List

The election and Jewish–Arab cooperation

• The Times of Israel, September 27, 2026: “Day after meeting opposition chiefs, Golan says Arab parties could be in next government.” Golan’s support for Arab coalition participation and divisions among opposition leaders.

• Reuters, July 29, 2026, updated August 2: “New Jewish-Arab party may complicate bid to oust Netanyahu.” A Place for Us All, voter mobilization and the risks of fragmenting votes among small parties.

Iran and armed organizations

• Matthew Levitt: Hezbollah: The Global Footprint of Lebanon’s Party of God — Amazon (select Kindle under formats). A detailed account of Hezbollah’s international terrorist operations, financing and organizational networks, including its relationship with Iran. The Washington Institute

• Reuters, October 7, 2026: “The status of Iran’s uranium enrichment programme.” The unresolved nuclear issue.

• Reuters, October 6, 2026: “One year on, Trump’s Gaza plan has not stopped Israeli fire or disarmed Hamas.”Continuing violence and disagreements over Hamas’s disarmament.

• Wilson Center: “Doctrine of Hamas.” Hamas’s founding charter and subsequent political document.

• U.S. National Counterterrorism Center: Counterterrorism Guide Profiles of Hamas, Hezbollah, Palestinian Islamic Jihad, the PFLP and other armed organizations.

Syria and regional security

• Congressional Research Service, February 26, 2026: “Syria: Transition and U.S. Policy.” Syria’s transition, continuing al-Qaeda-linked cells and the separate Islamic State threat.

• Reuters, May 14, 2025: “Syrian leader Sharaa’s path from global jihad to Trump meeting.” Sharaa’s jihadist background and subsequent political evolution.

• Reuters, July 15, 2025: “Israel strikes Syrian city, vows to protect Druze from government forces.” Violence in Sweida and Israel’s military intervention.

• International Crisis Group, November 26, 2025: “Restoring Security in Post-Assad Syria: Lessons from the Coast and Suweida.” Sectarian violence, Israeli intervention and the withdrawal arrangement.

• Reuters, August 23, 2026: “Syria foreign minister sees Israel security talks resuming despite no trust.” The possibilities and limits of a negotiated security agreement.

• Reuters, October 1, 2026: “Syrian government officials and Hezbollah held secret talks in Turkey, sources say.”Reporting on residual networks, arms smuggling and regional bargaining.

• James Jeffrey, Washington Institute, September 26, 2026: “Israel and Its ‘Near Abroad’ After the October Elections.” Security and diplomatic choices facing Israel’s next government.

Antisemitism, minority rights and school curricula

• Anti-Defamation League: Global 100: Index of Antisemitism. Survey evidence on antisemitic attitudes, which should be distinguished from government policy or military intentions.

• U.S. Commission on International Religious Freedom, July 2025: “Country Update: Iran.” Iran’s Jewish population and the discrimination and intimidation faced by religious minorities.

• Jordan — IMPACT-se: “Review of the Jordanian Curriculum 2025–2026.” Finds that messages of tolerance and coexistence sit alongside antisemitic stereotypes and material glorifying violent jihad and martyrdom. A troubling contradiction in a country with a peace treaty with Israel.

• Egypt — IMPACT-se: “Review of Changes and Remaining Problematic Content: Egyptian Textbooks, Selected Examples 2023–24.” Documents substantial improvements in revised textbooks, including recognition of Egypt’s Jewish heritage and Israel as a peace partner. However, unrevised textbooks in higher grades retain antisemitic stereotypes and hostility toward Israel.

• Regional comparison — Institute for National Security Studies: “The Portrayal of Jews and Israel in Muslim and Arab Textbooks: Major Trends.” Examines differences across education systems, including Egypt’s general public schools and separate Al-Azhar religious schools. Useful for understanding why neither hostility nor reform is uniform across the region.

• UNRWA schools — U.S. Government Accountability Office, January 2026: “West Bank and Gaza: State’s Reporting on UN Efforts to Address Problematic Textbook Content Had Gaps Before Funding Ended.” Examines Palestinian Authority textbooks used in UNRWA schools, efforts to address material inconsistent with neutrality, nonviolence and nondiscrimination, and weaknesses in oversight. Reports that teacher and community resistance complicated implementation of corrective guidance.

• Saudi Arabia — IMPACT “Review of Saudi Textbooks 2024–2026.” Documents continued reductions in extremist content and stronger messages of coexistence and religious tolerance. An important example of progress, although the report identifies room for further improvement.

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Many observers expect a big Democratic blue wave in 2026. Trump’s low approval rating gives Republicans a substantial headwind: unpopular presidents often fuel midterm losses for their party. Republican waves in 1994 and 2010 and Democratic waves in 2006 and 2018 illustrate how sharply the political balance can shift.

But waves are not inevitable. Democrats gained a net 41 House seats in 2018, while Republicans gained just nine in 2022, securing only a narrow majority despite Biden’s unpopularity.

Does 2026 more closely resemble the 2018 outcome where there was a substantial Democratic wave or 2022 where there was a smaller Republican wave?

My focus is on the two most recent elections because recent elections provide a better comparison for today’s polarized electorate, in which Americans’ close friendships often remain within partisan lines and the rural–urban political divide has widened. These divisions may leave fewer congressional seats genuinely competitive in 2026, limiting the size of a Democratic wave even amid widespread dissatisfaction with Trump.

One of the factors that impacts the size of a potential wave is the composition of the Congress prior to the election. The Republicans had a substantially larger margin entering the 2018 midterm (241 R versus 194 D) than the Democrats had in 2022 (222 D versus 213 R). One of the reasons the Democrats had a much larger pickup in 2018 than the Republicans had in 2022 is that there were many more vulnerable Republicans up for reelection in 2018.

On this measure, 2026 more closely resembles 2022 than 2018. Republicans won a 220–215 House majority in 2024, comparable to Democrats’ 222–213 majority after 2020 and far smaller than Republicans’ 241–194 majority after 2016. Democrats therefore need fewer pickups to regain control, but Republicans’ smaller seat total may also limit the opportunities for a large wave.

A second factor affecting the size of a potential wave—and driving much of the speculation—is presidential approval. Trump’s September 2026 Quinnipiac rating of 33% is substantially below his 44% approval in late October 2018 and Biden’s 40% in late October 2022. Although the figures come from different polling sources and dates, they suggest a considerably stronger presidential headwind for Republicans in 2026.

A third factor, often overlooked, is the opposition party’s standing. Democrats in 2018 and Republicans in 2022 each had 44% favorability in September Gallup polling. In September 2026, Quinnipiac found only 21% approval of congressional Democrats, with 70% disapproval. Job approval and party favorability are different measures, so these figures cannot establish how much weaker Democrats are today. But they suggest a potential obstacle to a blue wave: dissatisfaction with Trump does not necessarily translate into confidence in the Democratic alternative.

These comparisons leave me skeptical that a blue wave is in the bag. Trump’s weakness could expand Democratic opportunities, but the narrow Republican starting majority provides less evidence of an extended delegation waiting to be swept away.

Democrats’ poor performance ratings also raise questions about their ability to attract voters beyond their existing supporters. A Democratic takeover and a large Democratic wave are different outcomes: the former requires only a small net gain, while the latter requires victories across a much broader battlefield. District-level evidence will determine whether that broader opportunity exists.

This skepticism about the likelihood of the blue wave is reinforced by my ongoing analysis of competitive races.

A probabilistic analysis of roughly 70 contested House races points to a narrow Democratic majority. I have also collected data, discussed, and evaluated districts currently held by Democrat with the potential to flip Republican and seats currently held by Republicans with the potential to flip to the Democrats. The sum of the number of potential flips supports the forecast of a very small Democrat majority in the next Congress.

However, I cannot rule out the possibility that the Republicans will retain control of the House of Representatives.

Three factors, candidate selection, adverse coattails, and Republican gerrymandering, appear to be limiting Democratic gains this election year.

First, the Democrats have nominated several progressive candidates in swing districts including but not limited to Matt Little in MN-02, Manny Rutinel in CO-08, Sam Forstag in MT-01, Bob Brooks in PA-07, and William Lawrence in MI-07.

Second, the nomination of several Democratic Socialist candidates in some states or in urban districts could adversely impact the chances of more conservative nominees in the region and the state.

• Zohran Mamdani’s prominence could complicate Democratic campaigns across the New York metropolitan area, particularly in competitive districts with substantial Jewish electorates concerned about Israel and antisemitism. Concern about Mamdani could bolster Lawler in NY-17.

• Melat Kiros could give Republicans campaign material against Democrats in several other districts in Colorado.

• Many Democrats, including Dana Nessel Dana Nessel, are troubled by positions taken by Abdul El-Sayed and this person could potentially weaken support for other Democrats among voters who share those concerns.

• My Minnesota analysis examines whether Republicans could win both the Senate race and MN-02, given the Democratic nominees’ positions.

The concern is that voters may judge individual Democrats partly by the party’s most prominent progressive figures rather than the quality of the local candidate.

Third, Republican gerrymandering could contribute to roughly a dozen Democratic-held seats changing hands; my district-by-district analysis of Democratic seats that could flip Republican provides the details behind that estimate, available to paid subscribers.

My 2026 Midterm Election Resources provides links to papers on the 2026 midterms. People on LinkedIn should subscribe to the newsletter for updates on my economic and political analysis.

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Giving away wealth normally makes someone less wealthy. But what if the gift reduces the donor’s taxes while helping preserve the value of the assets the donor keeps?

Treasury’s new rules for Trump Accounts create an opportunity to examine that possibility. Eligible philanthropic donors can contribute individual company shares through Treasury to children’s accounts. Those shares generally cannot be sold for five years or until the end of the calendar year the child turns 17, whichever comes first. (So, if the goal is to keep shares off the market, donate to younger children.) By postponing potential sales, the arrangement could reduce selling pressure when employees and other insiders begin cashing out.

SpaceX president Gwynne Shotwell and her husband reportedly pledged roughly one share for each of more than two million children, with the announcement valuing the gift at approximately $325 million. Musk and leaders of other firms about to come on the market could follow.

SpaceX uses a staggered schedule for releasing insider shares. Some shareholders can begin selling after the first post-IPO quarterly earnings report, subject to specified conditions, with additional shares released over subsequent months. Ordinary restrictions generally expire after six months, while Musk and certain other major investors face approximately one-year restrictions.

What if shareholders could postpone some of those sales through charitable gifts, gain tax savings, and potentially increase the value of the shares they keep?

Research suggests that IPO lockup expirations can produce more than a brief dip in prices. Field and Hanka’s 2001 study found an average three-day abnormal return of approximately −1.5%, but that average conceals differences among companies.

Bradley, Jordan, Roten, and Yi found the largest losses among venture-backed technology companies, particularly those with substantial post-IPO price increases and unusually heavy trading around expiration.

Persistence matters too. Ofek and Richardson’s study of IPO lockups found declines of approximately 1%–3%, with evidence favoring a lasting price adjustment rather than temporary selling pressure followed by recovery.

Their subsequent study, DotCom Mania, reported average longer-run excess returns as low as −33% for Internet stocks after lockup expiration, linking insider selling and the relaxation of short-sale constraints to the collapse of inflated valuations.

The release of a large share of stocks can put downward pressures on stock prices. Mandatory retention of donated shares inside of Trump accounts might postpone stock price declines until the earnings grows and valuations are reasonable.

The possible stock-price effect is only one part of the calculation. Donating appreciated shares through a qualifying charity can provide a deduction generally based on their market value, subject to applicable limits, while avoiding realization of the embedded capital gain.

The deduction reduces taxable income; it is not a dollar-for-dollar tax credit. The tax savings could be especially valuable to high-income California residents, who may benefit from both federal and state charitable deductions.

These benefits generally already exist for qualifying charitable gifts. The new benefit from the rule allowing contributions to Trump accounts is the provision that shares be kept off the market for five years.

Could the donors come out ahead?

A hypothetical donation of 10% of Musk’s SpaceX holdings would be worth approximately $100 billion at recent prices with remaining stake worth $900 billion. A gift that generates $30 billion in tax savings and props up stock prices by 7.78 percent would increase Musk’s wealth.

The potential benefits to owners extend beyond taxes and delayed sales.

Distributing company shares to children could cultivate brand loyalty and a constituency of families with a financial interest in the company’s success.

Established public companies would have access to a channel of goodwill unavailable to private competitors.

Treasury’s stamp of approval can enhance a company’s reputation and confer a valuable competitive advantage, raising questions about corporate favoritism and whether other firms deserve the same treatment.

Donors choose which eligible shares to contribute, subject to Treasury approval, while recipient families generally cannot sell during the required holding period. This exposes children to concentrated investment risk while potentially supporting the value of donors’ remaining holdings.

One possible fix would be to pool donated shares in a diversified fund and distribute fund shares to children’s accounts. The fund could gradually sell and rebalance its holdings, preserving charitable giving while reducing dependence on any one company.

The irony is worth examining. Giving away stock might, under certain conditions, will make a billionaire richer.

The proposal is clever: it combines charitable giving and tax savings with restrictions that could support the value of donors’ remaining shares. Benefits to donors do not negate the value of the gift. But the children would bear the risk of holding shares in the company the donor selected. A program intended to build children’s wealth should be judged primarily by how well it serves them, including whether it provides adequate diversification.

Author’s note: Wealth advisers considering whether charitable giving could make their billionaire clients richer might consider spending $30 on an annual subscription. A modest investment in the scheme of things.

50 percent off coupon leading to $30 annual price.

https://www.economicmemos.com/56428713

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Iowa is a small state with five competitive races:

• Governor: Democrat Rob Sand vs. Republican Zach Lahn.

• U.S. Senate: Democrat Josh Turek vs. Republican Ashley Hinson.

• 1st District: Democrat Christina Bohannan vs. Republican incumbent Mariannette Miller-Meeks.

• 2nd District: Democrat Lindsay James vs. Republican Joe Mitchell for an open seat.

• 3rd District: Democrat Sarah Trone Garriott vs. Republican incumbent Zach Nunn.

The remaining House contest, between Republican Chris McGowan and Democrat Dave Dawson in the open 4th District, strongly favors Republicans.

Republicans currently hold the governorship, both Senate seats and all four House seats.

Trump carried Iowa by roughly 13 percentage points in 2024, but a weak rural economy caused in part by tariffs and high diesel prices could hurt Republicans.

The Senate Race:

Republican Ashley Hinson and Democrat Josh Turek are both credible candidates. The seat is open due to the retirement of Joni Ernst.

Ashley Hinson a former television journalist and state legislator, has represented northeastern Iowa in Congress since 2021. Hinson supports tariffs and restrictions on abortion. She recently broke with the President calling for an end of hostilities with Iran.

Turek, a state representative from Council Bluffs and Paralympic wheelchair-basketball gold medalist, has demonstrated an ability to win in a Republican-leaning district.

Turek’s emphasis on restoring Medicaid funding, protecting Affordable Care Act subsidies and reversing disruptive tariffs reflects a broadly conventional Democratic economic agenda.

The Senate polling is effectively tied. Turek leads by 0.7 percentage points across all nine polls, while Hinson leads by 0.25 points when Marist’s outlying eight-point Turek lead is excluded.

The gubernatorial race:

Democrat Rob Sand, a former prosecutor and Iowa’s twice-elected state auditor, appears to have substantial personal appeal beyond his party. He was the only Democrat to win statewide office in Iowa in 2022.

Republican Zach Lahn, a businessman, farmer and private-school co-founder, is seeking his first public office after defeating Trump-endorsed Congressman Randy Feenstra in the primary.

Polling indicates that Democrats are on course to win the governorship. Sand leads 50.1 percent to 42.9 percent in the RCP average and is ahead in every recent poll.

A victory by Sand the Democrat would not be a total surprise and would not by itself signal an ideological shift in the state. A state’s presidential voting pattern often does not carry over to gubernatorial contests, which are often determined by local issues rather than ideology.

The Competitive House Races

In southeastern IA-01 and Des Moines-centered IA-03, Republicans Miller-Meeks and Nunn are conservatives willing to sometimes break with Trump, recently opposing his Iran war policy. Northeastern IA-02’s Mitchell is more firmly Trump-aligned, defending tariffs and the war.

Democrats Bohannan, James and Trone Garriott are mainstream liberals appealing to the center. Bohannan favors optional Medicare buy-in rather than single-payer; Trone Garriott supports a public option preserving private insurance; James has criticized Biden’s border policies. Their campaigns emphasize affordability and health care rather than sweeping ideological change.

So, the Republican and Democrat candidates in Iowa differ substantially but candidates in both parties are at least attempting to appeal to voters in the center.

Democrats probably need to win at least one of the contested seats in Iowa to take control of the House. Mariannette Miller-Meeks in IA-01 is probably the most vulnerable because her margin of victory has been small in her three previous elections.

Author’s Note: Two of my recent articles, published on Medium, explore interesting election dynamics between Senate and House races in small potential swing states

Maine: The Maine Senate race is one of the most publicized contests in the country. The House race in ME-2 is a potential D to R flip because centrist Jared Golden, the only recent Democrat to win in this rural district, is retiring and former governor Paul LePage is currently the favorite.

Minnesota: The Minnesota Senate race has inexplicably gone under the radar even though the RCP average of polls in the Senate race is a dead heat and the margin in Minnesota in 2024 was much smaller than people realize. The Democrats have nominated a “progressive” in both the Senate contest and the open seat to replace Angie Craig in MN-2 creating a test of the viability of progressive candidates in swing districts.

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Losses early in retirement can disrupt the journey—even when long-run returns meet expectations.

Large investment losses early in retirement often have a large impact on retirement security, an impact that can be especially pronounced for individuals who stop savings and coast to retirement. Sequence-of-returns risk: the timing of returns matters, not just their long-run average.

Introduction

A recent Wall Street Journal article by Oyin Adedoyin, Young People Are Obsessed With This Simple Retirement-Savings Formula, describes Coast FI, an approach in which people accumulate enough early in life for investment growth to carry them toward retirement without further contributions. Coasting means stopping retirement contributions, while continuing to work to cover current expenses.

Coasting is often presented as a deliberate choice: a worker reaches a savings threshold and decides that further contributions are unnecessary. In practice, life events can produce a similar outcome without any carefully calculated decision to coast. Not everyone who starts at a major law firm makes partner or can sustain the hours and demands of that career. Having children, caring for relatives, illness, or losing a job can lead people to accept lower pay or reduce their working hours. They may continue covering current expenses while contributing little or nothing to retirement savings. For these workers, coasting is less a lifestyle preference than an adjustment to changed circumstances. The question is still whether their existing savings can support retirement—and how vulnerable that plan is to investment losses when withdrawals begin.

The basic calculation discounts a retirement savings target by an assumed compounded return over the years remaining until retirement:

Savings needed today = Retirement target ÷ (1 + annual return)ʸᵉᵃʳˢ

For example, a person seeking $1 million at age 65 and assuming a 7 percent nominal annual return would need $184,249.18 at age 40: $1,000,000 ÷ (1.07)²⁵. The experiment below considers a person with $165,824.26 at age 40 who stops contributing and retires at 62. With a 7 percent annual return, those savings grow to approximately $734,668 at retirement. The question is how long that portfolio can support spending that begins at $50,000 annually—and how losses early in retirement affect the answer.

The formula uses a single assumed compounded return even though annual returns often vary by a lot. This paper does not challenge the common planning assumption that long-run average market returns will be solidly positive.

Instead, I examine one additional risk: the sequence of returns once retirement withdrawals begin. Strong long-run returns do not necessarily prevent losses early in retirement or at an end of a career from exhausting savings sooner than expected.

Previous Research on sequence risk explains why an average return alone is insufficient for retirement planning:

• Wade Pfau’s regression-based analysis of lifetime returns shows that returns late in a career become particularly important when workers are still contributing, while early-retirement returns have disproportionate effects on sustainable spending.

• Michael Kitces examines sequence risk for savers and retirees and the vulnerability surrounding retirement. His research with Pfau also finds that starting retirement with a more conservative portfolio and gradually increasing equity exposure can improve sustainability under unfavorable return sequences.

• My earlier article, The Sequence of Returns Puzzle, illustrates why losses late in a worker’s saving career and early in retirement can be especially damaging. The experiment below applies the withdrawal side of that problem to a person who has stopped contributing at 40.

• My earlier article, When Higher Withdrawal Rates Backfire, examines how higher initial withdrawals amplify the damage from early retirement losses. Flexible withdrawal rules can help preserve savings but may require substantial spending cuts—leaving retirees financially solvent without maintaining an acceptable standard of living.

The Experiment

The experiment compares three investment scenarios: constant returns, losses at the beginning of retirement, and the same losses ten years later. All three have the same compounded investment return over the 52 years from age 40 to age 92.

• Scenario 1 — Constant returns: 7 percent nominal annually during both coasting and retirement.

• Scenario 2 — Early losses: a 10 percent loss in each of the years beginning at ages 62 and 63, with 7.7431 percent annually in every other year, including the coasting years.

• Scenario 3 — Later losses: a 10 percent loss in each of the years beginning at ages 72 and 73, with 7.7431 percent annually in every other year, including the coasting years.

Scenarios 2 and 3 each have two loss years and 50 normal years within the comparison period. Their normal-year return g is calculated from:

(0.90)² × (1 + g)⁵⁰ = (1.07)⁵²

Thus, a portfolio receiving no contributions or withdrawals would have the same ending wealth under every scenario at age 92. The stronger normal-year return compensates for the two loss years. Annual returns are converted into equivalent monthly compound rates, and calculations use the unrounded value of g.

The three scenarios share the following assumptions:

• Savings and coasting. Each person has $165,824.26 at age 40, makes no further retirement contributions, and takes no withdrawals before age 62. Scenario 1 earns 7 percent annually during these 22 years and reaches retirement with $734,668.09. Scenarios 2 and 3 earn 7.7431 percent annually during coasting and each reaches retirement with $855,491.09. Calculations use unrounded balances and returns.

• Consumption. Final-year salary is $150,000. Initial annual retirement consumption is one-third of that salary, or $50,000, regardless of wealth. Consumption rises 3 percent on each retirement anniversary.

• Monthly withdrawals. The first withdrawal occurs at age 62. Spending is $4,166.67 per month in the first year, calculated without rounding, and remains constant within each retirement year. Withdrawals occur at the beginning of each month, before investment returns.

• Other cash flows. The portfolio funds all modeled consumption. There is no additional income, saving, or reduction in spending following losses. Returns are net of fees; taxes are omitted.

• Comparison criterion. Count the full monthly withdrawals the portfolio can finance before the next scheduled withdrawal exceeds remaining assets.

Scenarios 2 and 3 enter retirement with identical wealth, approximately $120,823 more than scenario 1. Their comparison isolates the effect of moving the same two loss years from the beginning of retirement to ten years later.

Comparisons with Scenario 1 reflect the fact that Scenarios 2 and 3 require higher normal-year returns to offset their two loss years. The comparison between Scenarios 2 and 3 isolates the effect of the timing of those losses.

Results with Monthly Withdrawals

Scenario 1 — Constant returns: 263 full monthly withdrawals, or 21 years and 11 months of consumption. The first shortfall occurs at age 83 years and 11 months.

Scenario 2 — Early losses: 217 full monthly withdrawals, or 18 years and 1 month of consumption. The first shortfall occurs at age 80 years and 1 month.

Scenario 3 — Later losses: 289 full monthly withdrawals, or 24 years and 1 month of consumption. The first shortfall occurs at age 86 years and 1 month.

Moving the two loss years from the beginning of retirement to ages 72 and 73 adds 72 full monthly withdrawals, or six years of consumption. Both scenarios start retirement with the same wealth and experience the same investment returns in a different order.

Despite entering retirement with approximately $120,823 more than scenario 1, the early-loss portfolio supports spending for three years and ten months less. Withdrawals during the downturn reduce the capital available to benefit from subsequent growth.

Scenario 3 benefits from ten years of 7.7431 percent annual returns before its losses occur. Its portfolio supports spending for two years and two months longer than the constant-return portfolio.

This result illustrates that delaying losses allows a portfolio to build a larger cushion before withdrawals are affected.

Implications for the Coasting Calculation

Equal compounded returns over the full comparison period do not produce equal retirement spending outcomes. The early-loss portfolio begins retirement with more wealth than the constant-return portfolio but reaches a shortfall sooner. Moving those losses ten years later extends the funding period by six years.

The results illustrate why a coasting calculation cannot rely solely on an assumed long-run return. A worker may accumulate the projected savings balance and still face an insecure retirement if substantial losses occur when withdrawals begin. Under the early-loss path, these savings cannot fully fund the next scheduled monthly withdrawal shortly after age 80, leaving a considerable spending gap for someone who lives into their nineties.

This paper examines one set of savings, retirement age, and spending assumptions. Other combinations could produce substantially different outcomes and deserve further study. Monte Carlo simulations could extend the analysis by generating many possible investment return paths and estimating how often people who stop saving early can sustain their planned retirement spending. That research could help identify how much savings—and what margin for adverse returns—a worker needs before coasting becomes a reasonable retirement strategy.

Authors Note: This article is free to read and share. If you found it useful, consider supporting Economic and Political Insights with a paid subscription. Your support helps me continue researching retirement, health care, economics, and public policy. Use this coupon to subscribe for $30 for one year.

The appendix below explains the model and calculations for readers who want to examine the results.

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Appendix: How the Retirement Simulation Was Calculated

This appendix describes the calculations used in the retirement experiment and verifies the results reported in the paper. The purpose is to make the assumptions transparent and allow readers to reproduce the analysis.

Starting Conditions and Coasting Period

The model begins with a worker age 40 who has saved $165,824.26 and makes no additional retirement contributions. The worker continues working but allows the portfolio to grow until retirement at age 62.

Scenario 1 assumes a 7 percent nominal annual return during the 22-year coasting period:

$165,824.26 × (1.07)^22 = $734,668.09

Thus, the worker reaches retirement with $734,668.09.

Scenarios 2 and 3 are designed so that all three scenarios have the same compounded investment return from age 40 through age 92. These scenarios contain two years with a 10 percent loss and 50 years with a higher normal return.

The normal-year return is calculated so that:

(0.90)^2 × (1 + normal return)^50 = (1.07)^52

Solving this equation produces a normal-year return of approximately 7.7431 percent.

Applying that return during the coasting years gives:

$165,824.26 × (1.077431)^22 = $855,491.09

Therefore:

• Scenario 1 begins retirement with $734,668.09.

• Scenario 2 begins retirement with $855,491.09.

• Scenario 3 begins retirement with $855,491.09.

The higher retirement balances in Scenarios 2 and 3 reflect the fact that those scenarios require higher normal-year returns to offset their two future loss years.

Retirement Withdrawal Assumptions

The first withdrawal occurs at age 62.

Initial retirement spending is based on one-third of final salary:

$150,000 × 1/3 = $50,000 per year

The first monthly withdrawal is therefore:

$50,000 ÷ 12 = $4,166.67

Spending increases by 3 percent on each retirement anniversary. Withdrawals remain constant within each retirement year.

Withdrawals occur at the beginning of each month. The portfolio balance is reduced by the withdrawal before that month’s investment return is applied.

The monthly return is calculated from the annual return:

Monthly return = (1 + annual return)^(1/12) − 1

Investment Scenarios

The retirement return paths are:

Scenario 1: Constant returns

• 7 percent annual return every year.

Scenario 2: Early losses

• 10 percent losses at ages 62 and 63.

• 7.7431 percent annual returns in all other years.

Scenario 3: Later losses

• 7.7431 percent annual returns through age 71.

• 10 percent losses at ages 72 and 73.

• 7.7431 percent annual returns thereafter.

The only difference between Scenarios 2 and 3 is the timing of the two loss years.

Verification of Results

The monthly withdrawal model was recalculated using the assumptions above.

The results are:

Scenario 1: Constant returns

• 263 full monthly withdrawals.

• Spending supported for 21 years and 11 months.

• First insufficient withdrawal occurs at approximately age 83 years and 11 months.

Scenario 2: Early losses

• 217 full monthly withdrawals.

• Spending supported for 18 years and 1 month.

• First insufficient withdrawal occurs at approximately age 80 years and 1 month.

Scenario 3: Later losses

• 289 full monthly withdrawals.

• Spending supported for 24 years and 1 month.

• First insufficient withdrawal occurs at approximately age 86 years and 1 month.

The calculations reproduce the results reported in the paper.

Limitations and Extensions

This experiment is designed to isolate one issue: the effect of the timing of investment losses after retirement begins. It does not estimate the probability of experiencing any particular return sequence.

A more complete analysis would use Monte Carlo simulations to generate many possible investment paths and examine how often different combinations of savings, retirement ages, spending levels, and return sequences lead to successful or unsuccessful outcomes.

The purpose of this exercise is narrower: to demonstrate that even when long-run compounded returns are equal, the timing of losses can materially change how long retirement savings support planned spending.

Additional Readings:

Pfau, Wade D. The Lifetime Sequence of Returns: A Retirement Planning Conundrum (2013).

Kitces, Michael. Valuation-Based Tactical Asset Allocation in Retirement (2014). Discussion of joint research with Pfau on rising equity glidepaths.

Bernstein, David. The Sequence of Returns Puzzle: Why Timing Hurts Workers and Retirees in Opposite Ways (2025). Examines why losses late in a worker’s saving career and early in retirement can be particularly damaging.

Bernstein, David. When Higher Withdrawal Rates Backfire (2026). Examines how higher initial withdrawals amplify exposure to early losses and why flexible withdrawal rules may preserve savings at the cost of substantial spending cuts.

A recent Wall Street Journal article, “The Surprise Social Security Benefit That Goes to Parents Who Have Kids Late,” called attention to a little-known provision of Social Security: when a parent begins receiving retirement benefits, eligible dependent children may also qualify for monthly benefits.

The Journal provides a useful introduction to the benefit and explains why it can complicate the decision about when to claim Social Security. This article builds on that discussion by looking at several additional questions: How many people receive the benefit? How much can children receive? Is there a limit when several children qualify? And what are the rules for stepchildren, adopted children, and children born or adopted outside the United States?

The provision is relatively narrow. In July 2026, about 731,000 children of retired workers were receiving benefits, with an average monthly benefit of about $960. Many of these beneficiaries are disabled adult children rather than young children. At the end of 2025, about 323,000 children under age 18 were receiving benefits on the records of retired workers.

Although the benefit may seem obscure, it is almost as old as Social Security itself. The original Social Security Act of 1935 provided retirement benefits to workers but did not provide benefits to their dependent children. Congress added benefits for spouses and dependent children of retired workers in the 1939 Social Security Amendments, before the first monthly Social Security retirement checks were issued in 1940. The amendments represented an important change in the program: Social Security became not simply retirement insurance for an individual worker but also a form of insurance for the worker’s family. The basic concept that a qualifying child could receive a benefit equal to 50 percent of the worker’s benefit also dates to 1939.

For the relatively small number of older parents who still have dependent children, the benefit can nevertheless be financially significant. An eligible child’s basic benefit can be as much as 50 percent of the worker’s Primary Insurance Amount (PIA)—essentially the benefit the worker would receive at full retirement age. Importantly, the child’s basic benefit is based on the PIA rather than on the reduced retirement benefit the parent may receive after claiming Social Security early. The child’s actual payment can still be lower because of Social Security’s family-maximum rules.

Three features of the benefit are particularly important to the decision about when an older parent should claim Social Security:

• Claiming before full retirement age reduces the parent’s benefit, but not the child’s basic benefit in the same way. The parent’s monthly retirement benefit is permanently reduced for claiming early, while the child’s basic benefit continues to be calculated as a percentage of the parent’s PIA, subject to the family maximum.

• Waiting beyond full retirement age increases the parent’s benefit but does not similarly increase the child’s benefit. For people born in 1943 or later, delayed-retirement credits increase the worker’s benefit by 8 percent for each year of delay up to age 70. Those delayed-retirement credits do not increase the child’s benefit.

• Most importantly, the child generally receives no benefit until the parent claims Social Security retirement benefits. A parent who waits from age 67 to 70 may increase his or her own eventual monthly benefit, but during those three years an otherwise eligible child generally receives nothing on that parent’s retirement record. Those forgone child benefits can be substantial and cannot ordinarily be recovered later.

These rules create an unusual claiming-age tradeoff. For someone without dependent children, waiting from full retirement age until 70 can be attractive because of the 8 percent annual delayed-retirement credits. An older parent must weigh those higher future retirement payments against child benefits that the family could receive by claiming sooner. Depending on the number and ages of the children, claiming at full retirement age—or potentially earlier—can therefore deserve considerably more attention than it would for a similarly situated retiree without dependent children.

There is, however, a limit on how large the family benefit can become. Social Security does not continue paying an additional 50 percent of the worker’s PIA for every additional child without limit. Benefits paid on one worker’s earnings record are subject to a family maximum, which for retirement families is determined by a statutory formula and commonly results in total family benefits of roughly 150 to 180 percent of the worker’s PIA. The retired worker’s own benefit is not reduced; instead, benefits payable to children and other eligible family members are reduced when necessary. Thus, a parent with one or two eligible children may receive substantial additional family benefits, but a very large number of children would not produce correspondingly large benefits. So, no, this is not a reason to go out and have 100 children late in life.

Potentially eligible children include a worker’s biological children, legally adopted children, and qualifying stepchildren. Ordinarily, the child must be unmarried and under age 18; age 18 or 19 and a full-time student in elementary or secondary school; or age 18 or older with a qualifying disability that began before age 22.

A stepchild can qualify, but Social Security generally requires a dependency test—typically that the worker was providing at least one-half of the child’s support at the relevant time.

Legally adopted children can also qualify. Timing, however, matters. A child adopted before the worker becomes entitled to retirement benefits is generally considered dependent on the worker. A child adopted afterward can face additional requirements, particularly if the child was not already the worker’s natural child or stepchild. The distinction can be especially important for foreign adoptions because the rules for certain post-entitlement adoptions require an adoption decree from a court of competent jurisdiction within the United States. A small body of case law has addressed disputes over these post-entitlement adoption and dependency requirements.

Foreign birth or citizenship does not automatically disqualify a child. A foreign-adopted or foreign-resident child may qualify, but the precise parent-child relationship, timing of the adoption, citizenship or immigration status, and rules governing payment while outside the United States can all matter.

The bottom line is Social Security benefits for children of older parents is an old and relatively narrow Social Security provision that has received little attention because most people do not have dependent children when they retire. But for the families to whom it applies, the amounts can be substantial.

An eligible child generally cannot begin collecting on a retired parent’s record until the parent claims retirement benefits. This provision can impact the decision on when to claim benefits.

Sources

The Wall Street Journal, “The Surprise Social Security Benefit That Goes to Parents Who Have Kids Late,” September 27, 2026
https://www.wsj.com/personal-finance/the-surprise-social-security-benefit-that-goes-to-parents-who-have-kids-late-05497d3e

Social Security Administration, Benefits for Children
https://www.ssa.gov/faqs/en/questions/KA-02053.html

Social Security Administration, Family Benefit Amounts and Family Maximum
https://www.ssa.gov/family/amount

Social Security Administration, Annual Statistical Supplement, 2026 — Benefits to Children of Retired Workers
https://www.ssa.gov/policy/docs/statcomps/supplement/2026/5a.html

Social Security Administration, Monthly Statistical Snapshot
https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/

Social Security Administration, Historical Development of the Social Security Act
https://www.ssa.gov/policy/docs/progdesc/sspus/histdev.html

Social Security Administration, Delayed Retirement Credits
https://www.ssa.gov/benefits/retirement/planner/delayret.html

Social Security Administration, 20 C.F.R. §404.353 — Child’s Benefit Amount
https://www.ssa.gov/OP_Home/cfr20/404/404-0353.htm

Social Security Administration, 20 C.F.R. §404.362 — Dependency of a Legally Adopted Child
https://www.ssa.gov/OP_Home/cfr20/404/404-0362.htm

Social Security Administration, Program Operations Manual — Stepchild Dependency
https://secure.ssa.gov/poms.nsf/lnx/0200306232

Adoption, stepchild dependency, and international-payment cases can be fact-specific. Eligibility in an individual case should be confirmed with the Social Security Administration.

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Before travel and other obligations take me offline for a while, I am publishing three memos on the 2026 midterm elections.

Two are companion databases: Democratic House Seats Republicans Could Flip in 2026, covering potentially vulnerable Democratic-held districts, and Republican House Seats Democrats Could Flip in 2026, covering potentially vulnerable Republican-held districts.

This third memo provide analysis of this raw data and documents factors which are not fully embedded in baseline forecasts. The central question is why the 2026 contest for control of the House is more uncertain than many blue-wave forecasts suggest.

Comment One: Current Ratings and the Earlier Model Point to a Narrow Democratic Majority

The current watch lists give Democrats the stronger—but still narrow—path to House control. Democrats benefit from 15 Republican-held tossups compared with four Democratic-held tossups. An even division would turn the current 220–215 Republican majority into approximately a 219–216 or 220–215 Democratic majority. Republicans have a slight advantage among seats already leaning toward a flip, with three of their projected gains result from redistricting.

This closely matches my August 29 paper, Who Will Control the House in 2026?, which projected approximately 220 Democrats, 214 Republicans and one Independent. The model also found weaker Democratic prospects in rural districts and cautioned that national events could shift many races together. Both approaches therefore suggest a small Democratic advantage, but one vulnerable to modest forecasting errors.

Comment Two: Why National Polling Looks More Democratic Than the District Ratings

National polling points toward larger Democratic gains than the district-by-district baseline. Democrats hold a substantial generic-ballot lead, while President Trump’s approval rating is below 40 percent. Many analysts view these figures, together with Democratic strength in special elections and the normal midterm difficulties facing the president’s party, as evidence that a blue wave is already developing.

My baseline does not dismiss that evidence. It simply starts with current district ratings, which may not yet fully reflect a changing national mood. The Middle East war, oil prices above $100, rising interest rates and concerns about Trump’s conduct could move many competitive races toward Democrats at the same time.

Specific issues appear to be breaking toward Democrats in different regions. In Iowa and other rural states, higher costs stemming from the Iran war and the economic effects of tariffs have hurt local economies and Republicans are no longer supporting the war with Iran. In Kansas, Trump’s threatened ban on Bombardier aircraft, produced by a Canadian company, threatens 1,500 jobs. In Florida, Republican María Elvira Salazar has warned that the administration’s immigration campaign has “gone too far” and is alienating some voters who supported Trump in 2024.

Comment Three: Democratic Vulnerabilities Remain

Favorable national conditions do not eliminate Democratic vulnerabilities involving cultural issues, candidate selection, or Israel and antisemitism.

• Cultural issues: Controversies involving women’s sports, gender, race and unequal treatment can damage the Democratic brand; repeated hard fouls against Caitlin Clark provide one example.

• Candidate–district fit: Progressive nominees Manny Rutinel in Colorado’s 8th District, William Lawrence in Michigan’s 7th and Sam Forstag in Montana’s 1st appear poorly matched in competitive or Republican-leaning districts.

• Antisemitism and Israel: The affected constituency extends beyond Jewish voters to evangelical Christians, national-security voters, civil-liberties advocates and others concerned about antisemitism or support of Israel.

Dana Nessel’s argument—that Jewish voters should place the interests of the country or the world above concerns about their own security, antisemitism, and Israel—is unlikely to persuade Jewish voters who are highly concerned about antisemitism, strongly support the concept of a Jewish state and differ vigorously from the views on Israel offered by the progressive wing of the party.

Conclusion

The district-by-district baseline points to a narrow Democratic majority of approximately 219–216 or 220–215. It is less favorable to Democrats than many national forecasts because it starts with current race ratings rather than assuming that a blue wave will occur.

That does not mean the blue-wave argument is wrong. The generic ballot, Trump’s approval rating, economic pressures and the normal midterm penalty could move many races toward Democrats at the same time. If that happens, the current ratings will understate Democratic gains.

The reverse is also possible. Candidate quality, cultural issues, rural weakness and concerns about Israel and antisemitism could prevent Democrats from fully benefiting from the national environment.

The best way to read the forecast is current district ratings point to a narrow Democratic majority, while national conditions open the door for larger Democratic gains.

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I am going offline for a bit because of travel and other obligations, but before I do, I am publishing three related essays about control of the House. Two present the underlying race-by-race data. This second data essay examines Democratic-held seats that Republicans could capture in 2026; the companion essay examines Republican-held seats that Democrats could capture. A third essay will explain what the two lists currently imply about House control and how they can be used to track the election.

Bottom line. This revised memo identifies 35 Democratic-held House seats that could move to Republicans in 2026. Six currently favor Republicans, four are tossups, five lean Democratic and seventeen are longer-shot Republican opportunities rated likely Democratic. Three additional seats—LA-06, TN-09 and TX-09—appear effectively certain to flip Republican because of redistricting.

Rating note. Except where otherwise indicated, the ratings in this memo are from the 270 toWin consensus forecast as of September 16, 2026. The consensus combines ratings from multiple election forecasters, including the Cook Political Report. The “Safe Republican after redistricting” designations for LA-06, TN-09 and TX-09 are my assessments rather than published consensus ratings. Ratings describe the current competitiveness of each race and should not be interpreted as precise probabilities.

House races in alphabetical order

AL-02 Rhett Marques R and Shomari Figures D

Likely Republican. Boundary changes have converted Figures’s Black Belt seat from a Democratic anchor into one of the clearest Republican pickup opportunities. Marques begins with the structural advantage, so the principal question is whether Figures can build enough crossover support to overcome the new district’s Republican tilt.

Subscriber note: The full analysis below examines 35 Democratic-held seats, with candidate matchups, race ratings, and the factors shaping Republican pickup opportunities. Subscribe for this research and more analysis of elections, economic policy, and personal finance. Use this coupon for 50% off an annual subscription—$30 for the year.

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An alphabetical watch list for subsequent analysis

I am going offline for a bit because of travel and other obligations, but before I do, I am publishing three related essays about control of the House. Two present the underlying race-by-race data. This first data essay examines Republican-held seats that Democrats could capture in 2026; the companion essay examines Democratic-held seats that Republicans could capture. A third essay will explain what the two lists currently imply about House control and how they can be used to track the election.

Bottom line. Among the 30 potential Democratic pickups, the September 16 consensus rates eight as Lean Democratic, fifteen as Tossups, two as Lean Republican and five as Likely Republican. Alaska is counted separately because Bill Hill is an independent rather than a Democrat; the consensus currently rates the Republican-held Alaska seat Likely Republican.

Rating note. The categories in this memo are from the 270 toWin consensus forecast as of September 16, 2026. That consensus aggregates multiple election forecasters, including the Cook Political Report; the ratings are not my proprietary probabilities. In this Republican-held-seat list, Lean Democratic means a Democratic pickup is favored, Tossup means neither party has a clear advantage, Lean Republican means a Republican hold is favored and Likely Republican identifies a longer-shot Democratic pickup opportunity. Ratings describe current competitiveness and may change as the campaign develops.

Purpose. This memo identifies 31 Republican-held House seats that could change hands in 2026: 30 potential Democratic pickups and one independent pickup opportunity in Alaska. The districts are presented in alphabetical order rather than ranked by probability.

Next step. The short descriptions explain why each race merits attention. A subsequent analysis will organize the seats into logical subsets based on competitiveness, geography, candidate fit and the broader political questions each contest can help answer.

Independent exception. AK-AL remains on the list because Republican Nick Begich faces independent Bill Hill after Democrat Matt Schultz suspended his campaign and endorsed Hill. A Hill victory would not be a Democratic pickup, but it could still affect control of the House.

House races in alphabetical order

AK-AL Nick Begich R and Bill Hill I Independent pickup opportunity

Likely Republican. Democrat Matt Schultz suspended his campaign and endorsed independent Bill Hill. Alaska remains analytically distinctive because its nonpartisan top-four system and ranked-choice general election make party labels a less complete guide than in the other districts.

Subscriber note: The full analysis below examines 31 Republican-held seats, including 30 potential Democratic pickups and an independent pickup opportunity in Alaska. It includes candidate matchups, race ratings, and the factors shaping each contest, with links to additional reporting. More memos drawing on this race-level data are coming soon. Use this coupon for 50% off an annual subscription—$30 for the year.

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David Bernstein
September 2026

While watching CNBC’s coverage of a recent Oracle earnings announcement, I noticed an intriguing pattern: losses before the announcement appeared to be largely offset by gains after the results were released. Because Oracle reported after the market closed, the two movements occurred in distinct trading windows. That raised a broader question: Do stocks typically continue their pre-announcement movement after earnings—or reverse it?

This study examines four quarterly announcements for each of seven large technology companies—Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia and Tesla—and seven established dividend-paying companies—Visa, Costco, Amgen, Chubb, Aflac, McKesson and Clorox. The sample is limited to earnings announcements released after the regular market close.

Returns are measured relative to RSP, the Invesco S&P 500 Equal Weight ETF. Unlike the conventional capitalization-weighted S&P 500, RSP gives approximately equal weight to every company in the index and is therefore less dominated by the largest technology stocks. Subtracting RSP’s return from each company’s return helps separate company-specific movement from changes in the overall market.

The pre-announcement window runs from the previous trading-day close to the announcement-day close. Because the earnings release occurs after the announcement-day close, this window ends before investors receive the report. The post-announcement window runs from the announcement-day close to the following trading-day close and therefore captures the first trading session following the release.

For both windows, the stock’s return is reduced by RSP’s return over exactly the same period. All results described below are therefore market-adjusted rather than raw stock returns.

This is what I found.

Key Findings:

• Post-announcement movements were substantially larger than pre-announcement movements in both groups.

• Technology stocks experienced larger post-announcement movements than dividend-paying stocks.

• Dividend-paying stocks had higher average post-announcement returns in this sample, but the difference was not statistically decisive.

• Reversals were frequent in both groups, but pre-announcement returns did not reliably predict subsequent movements.

Analysis:

• Pre-announcement movements were nearly identical across the groups. The average absolute market-adjusted return was 1.35 percent for the technology stocks and 1.29 percent for the dividend payers—a difference of only 0.06 percentage points. Absolute returns measure the size of a movement without regard to whether it was positive or negative.

• Post-announcement movements were substantially larger, particularly for technology stocks. The average absolute market-adjusted return increased to 6.38 percent for the technology group and 4.03 percent for the dividend payers. The 2.35-percentage-point difference had a Welch-test p value of 0.035.

• Dividend-paying stocks had higher average post-announcement returns. Their average market-adjusted return was positive 1.28 percent, compared with negative 0.83 percent for the technology group—a difference of 2.11 percentage points. However, the difference was not statistically decisive: the Welch test produced a p value of 0.243.

• The median results also favored dividend-paying stocks. Their median post-announcement market-adjusted return was positive 1.52 percent, compared with negative 2.07 percent for the technology stocks—a descriptive difference of 3.59 percentage points.

• Technology stocks displayed greater post-announcement dispersion. Their standard deviation was 7.89 percent, compared with 5.23 percent for the dividend payers. The 2.66-percentage-point difference produced a Brown-Forsythe p value of 0.052—borderline evidence rather than statistical significance at the conventional 5 percent level.

• Reversals were frequent in both groups. A reversal occurs when the pre- and post-announcement market-adjusted returns have opposite signs. Sixteen of the 28 technology events and 18 of the 28 dividend-paying events met that definition. Fisher’s exact test produced a p value of 0.785, providing no evidence that reversal frequency differed between the groups.

• The four possible movement patterns produced no simple rule. The technology group recorded five gains followed by gains, 10 gains followed by losses, six losses followed by gains and seven losses followed by losses. The dividend payers recorded nine gains followed by gains, 11 gains followed by losses, seven losses followed by gains and one loss followed by a loss.

• The correlations did not establish a reliable relationship between pre- and post-announcement returns. The technology group’s Pearson and Spearman correlations were positive 0.164 and positive 0.083, respectively; neither was statistically significant. For the dividend payers, the Pearson correlation was negative 0.368, with a p value of 0.054, but the Spearman correlation was only negative 0.147, with a p value of 0.456. The conflicting dividend results suggest that a few relatively large observations influenced the Pearson estimate. A larger study incorporating more companies, more quarters and information about earnings, revenue and guidance surprises is needed.

These results should be considered exploratory. Each group contains 28 events but only seven companies, with four repeated observations for each company. The conventional tests do not fully account for that dependence, so the observations should not be treated as if they came from 28 independent companies in each group.

Source note: Nasdaq historical-price and earnings-surprise data retrieved September 2026. Calculations by the author. The workbook containing all 56 observations, formulas, statistical results and variable definitions is available to paid subscribers. The blog is inexpensive with the 50 percent off coupon available through the subscribe now button.

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Pennsylvania could play a central role in determining control of the House, with four competitive Republican-held districts and a popular Democratic governor leading the statewide ticket.

Key Findings

· PA-07 and PA-08, both narrowly flipped by Republicans in 2024, are the clearest tests of the national environment.

· One Democratic pickup among PA-07, PA-08 and PA-10 would be important; winning two would make Pennsylvania a major contributor to a House majority.

· PA-10 is less useful as a national indicator because it depends heavily on the unusual contrast between Scott Perry and Janelle Stelson.

· PA-01 is the most difficult Democratic target because Brian Fitzpatrick substantially outperformed the presidential ticket in 2024.

· Democrats have nominated mostly centrist or pragmatic candidates who may benefit from Governor Josh Shapiro’s potential coattails.

Here are concise summaries of the four races.

PA-01: Fitzpatrick’s brand faces a strong test

Pennsylvania’s First District includes Bucks County and part of Montgomery County. Biden won it in 2020, and Harris narrowly carried it in 2024, yet Republican Brian Fitzpatrick defeated Ashley Ehasz by nearly 13 points after surviving the 2018 Democratic wave.

Fitzpatrick, a former FBI agent and federal prosecutor, has represented the district since 2017 and chairs the bipartisan Problem Solvers Caucus. He supports Ukraine and election reform, opposed Trump’s expansion of the Iran war and voted against the final 2025 tax-and-spending law because of its Medicaid provisions. He also supported extending ACA subsidies.

Democrat Bob Harvie taught social studies for 26 years before serving in Falls Township government and winning two countywide elections. A pro-labor Democrat, he defeated a progressive primary opponent while emphasizing affordability and incremental health-care reform.

Harvie is also challenging Fitzpatrick over data centers. He wants a moratorium until protections are established for utility customers, water supplies and communities, while criticizing Fitzpatrick’s support for federal industry incentives and an Amazon project in Falls Township. Their campaign has become personal, with disputes over debates and a federal contracting investigation that Harvie says does not involve him.

Fitzpatrick’s bipartisan reputation remains formidable. Because Harris carried the district while Fitzpatrick won decisively, his defeat or a small victory margin would indicate a large Democratic night.

PA-07: A Working-Class Fight in the Lehigh Valley

Pennsylvania’s Seventh District covers the Lehigh Valley, including Allentown, Bethlehem and Easton, alongside warehouses, suburbs and rural Carbon County. Biden carried it narrowly in 2020; Trump won by about three points in 2024. Republican Ryan Mackenzie nevertheless defeated Democratic Representative Susan Wild by only about one point.

Mackenzie, an NYU graduate with a Harvard MBA, worked for the Labor Department and served 12 years in the Pennsylvania House. He is a conventional Trump-aligned conservative who supported the 2025 tax-and-spending law but broke with Republican leaders to support extending ACA subsidies.

Democrat Bob Brooks did not attend college or previously hold office. A former Bethlehem firefighter, he now leads Pennsylvania’s firefighters union. His economic-populist campaign emphasizes wages, unions, health care and higher taxes on wealthy individuals and corporations while also stressing border security and public safety. His endorsements range from Governor Josh Shapiro and the Blue Dog PAC to Bernie Sanders and the Working Families Party. J Street and the Jewish Democratic Council back Brooks; AIPAC supports Mackenzie.

Both candidates favor tighter oversight of data centers, reducing that issue’s partisan importance. Mackenzie portrays Brooks as too far left; Brooks calls Mackenzie Trump’s “lapdog.” Because Mackenzie won narrowly and ran behind Trump, PA-07 could change parties without a Democratic wave.

PA-08: A Local Candidate Tests a Republican Shift

Pennsylvania’s Eighth District includes Scranton, Wilkes-Barre, former coal communities, the Poconos and extensive rural territory. Trump carried it by about nine points in 2024, but Republican Rob Bresnahan defeated six-term Democrat Matt Cartwright by only 1.6 points.

Bresnahan, a University of Scranton graduate, ran his family’s electrical-contracting company and developed real estate before entering Congress. He supported Trump’s 2025 tax-and-spending law and opposed withdrawing American forces from hostilities with Iran, but broke with Republican leaders on ACA subsidies, federal employees’ bargaining rights and insulin costs.

Democrat Paige Cognetti has a Harvard MBA and experience in international development, investment management and state government. She won Scranton’s mayoralty as an independent after a corruption scandal and later became a Democrat. During her administration, Scranton left three decades of state financial oversight and regained an investment-grade credit rating. Her campaign emphasizes competent government, abortion rights, broader health coverage, unions and fiscal management.

Cognetti attacks Bresnahan over congressional stock trading and data centers. Bresnahan advocated a trading ban but continued making numerous trades through advisers. He promotes data-center investment while supporting local zoning authority and owning related investments. Cognetti opposes pending projects because of their possible effects on utilities and taxpayers.

Cognetti’s local record gives Democrats a plausible route despite the district’s Republican presidential preference.

PA-10: Perry and Stelson Meet Again

Pennsylvania’s Tenth District includes Harrisburg, York, growing suburbs and conservative rural communities. Trump carried it by about five points in 2024, but Republican Scott Perry defeated Democrat Janelle Stelson by only 1.2 points—roughly 5,000 votes. The race is a tossup.

Perry, an Army National Guard combat veteran and former construction-business owner, previously chaired the House Freedom Caucus. He is a strong Trump ally who supported efforts to overturn the 2020 election and backed the 2025 tax-and-spending law, including its Medicaid provisions.

Stelson spent nearly four decades as a television journalist, giving her exceptional districtwide recognition. A Republican until 2023, she campaigns as a centrist Democrat supporting abortion rights, Medicaid, the Affordable Care Act, NATO and continued aid to Ukraine and Israel. She has criticized an open-ended war with Iran.

Foreign policy provides a sharp contrast. Perry opposes extensive commitments to Ukraine and NATO. Although politically supportive of Israel and military pressure on Iran, he voted against the 2024 Israel aid package because of his opposition to foreign spending, putting him at odds with AIPAC.

Independent Isabelle Harman has no apparent path to victory but could siphon anti-Perry votes. This genuine battleground will be close. Stelson is unusually well suited to the district, and her victory would likely strengthen the House’s centrist caucuses.

Concluding Thoughts: PA-07 and PA-08 are the bellwethers for control of the House. Eight is Democrats’ cleanest pickup opportunity; Seven is a knife-fight. Ten turns on candidate-specific wildcards. And One is the dam breaker: Fitzpatrick probably does not lose unless a blue wave is sweeping across the country.

Crucial House Races

• Four Pennsylvania House Races That Could Help Decide the Majority

• September 11 — Virginia’s Second District

• September 9 — Minnesota Senate

• September 7 — New York’s 17th District

• September 6 — Colorado’s 8th District

• September 4 — Washington’s 3rd District

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I am publishing a bit late today because I needed to complete this finance note comparing a 10-year Treasury with a utility ETF. I can’t quit the day job—yet.

Author’s note: Economic and Political Insights is a multi-topic publication covering politics, economic policy and personal finance. Readers with similarly diverse interests can receive a 50 percent discount on an annual subscription, reducing the first-year price to approximately $30.

Many of the races profiled in this series feature at least one candidate who appears mediocre, excessively ideological or badly matched to the district. Virginia’s Second District offers a welcome exception. Both candidates have served in the military and Congress—and compiled strong records in both institutions. Jen Kiggans spent ten years as a Navy helicopter pilot before becoming a geriatric nurse practitioner. Elaine Luria served for twenty years as a nuclear-trained surface warfare officer and eventually commanded approximately 400 sailors.

Luria represented the district for four years, from 2019 through 2022. Kiggans defeated her in 2022 and has represented the district since January 2023. The 2026 contest is their rematch.

The Second District occupies the southeastern corner of Virginia. It includes Virginia Beach, the Eastern Shore, Suffolk, Franklin, and portions of Chesapeake, Isle of Wight and Southampton County. Its combination of suburban communities, rural areas, coastal economies and military installations makes it one of the country’s most distinctive battleground districts.

The military is embedded in the region’s economy and culture. Joint Base Little Creek–Fort Story is located within the district, while Naval Station Norfolk and several other major installations sit nearby. Veterans and active-duty military families form an unusually large portion of the electorate.

The district is also one of the most evenly divided in the country. Joe Biden carried it by approximately two points in 2020. Donald Trump carried it in 2024 by only about two-tenths of a percentage point, 49.5 to 49.3 percent. Virginia Democrats attempted to redraw the district to make it more favorable to their party, but the Virginia Supreme Court invalidated the process in May. The election will therefore be conducted under the existing map.

Kiggans earned a bachelor’s degree in international relations from Boston University and then entered the Navy. She served for ten years as a helicopter pilot, flying H-46 and H-3 helicopters and completing two deployments to the Persian Gulf. After leaving active duty, she used the GI Bill to earn nursing degrees from Old Dominion and Vanderbilt and became a board-certified adult-geriatric nurse practitioner. She served in the Virginia Senate from 2020 until her election to Congress in 2022. Her husband is a retired Navy F/A-18 pilot.

Luria graduated from the United States Naval Academy in 1997 and served for twenty years. A nuclear-trained surface warfare officer, she operated nuclear reactors and completed deployments to the Middle East and Western Pacific. She was among the first women in the Navy to spend an entire career serving on combatant ships. Luria attained the rank of commander and led Assault Craft Unit Two, a combat-ready organization of approximately 400 sailors, before retiring in 2017. She subsequently founded the Mermaid Factory, a small Virginia business.

Both candidates have made credible efforts to work across party lines. Luria belonged to the New Democrat Coalition and the bipartisan Problem Solvers Caucus. Kiggans belongs to the Republican Governance Group and Republican Main Street Caucus and has collaborated with Democrats on veterans’ affairs, health care and government funding. She also supported the bipartisan 2023 debt-ceiling agreement and was the only Virginia Republican to vote to expel George Santos.

On defense and foreign policy, both have records that I find reassuring. Kiggans supported aid to Ukraine, Israel and Taiwan. Luria called for a larger Navy, criticized Democratic defense proposals as inadequate and warned that the United States was not preparing sufficiently for competition with China. In 2021, she was the only House Democrat to oppose simply repealing the 2002 authorization for the use of military force in Iraq. She argued that Congress should replace it with an updated authorization rather than create a vacuum.

Health care presents the sharpest domestic difference. Kiggans recently appeared with CMS Administrator Mehmet Oz to promote $122 million in rural-health funding for Virginia. Luria has criticized Kiggans for supporting Republican legislation that reduced projected Medicaid spending and did not extend the enhanced ACA subsidies. These issues are particularly important to rural hospitals, many of which depend heavily on Medicaid revenue.

On broader economic policy, however, both have generally supported their parties’ agendas. Neither has broken decisively with her party on a major domestic initiative or adopted the pragmatic third-party economic agenda I have advocated. Even in this unusually strong field, there remains room for improvement.

I will be watching this race closely on election night. A Luria loss would signal both a narrower path for Democrats to retake the House and diminished prospects for centrists to influence the party’s future.

Author’s note: Economic and Political Insights is a multi-topic publication covering politics, economic policy and personal finance. Readers with similarly diverse interests can receive a 50 percent discount on an annual subscription, reducing the first-year price to approximately $30.

Crucial Races

• Four Pennsylvania House Races That Could Help Decide the Majority

• September 11 — Virginia’s Second District

• September 9 — Minnesota Senate

• September 7 — New York’s 17th District

• September 6 — Colorado’s 8th District

• September 4 — Washington’s 3rd District

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With the 10-year Treasury yield approaching 5 percent, income-oriented investors face a serious choice: lock in a high government-guaranteed return or invest in utility stocks through the Vanguard Utilities ETF.

VPU is a useful comparison because utilities are often treated as bond substitutes. Utility companies typically pay relatively high dividends and generate comparatively stable revenue, but investors also assume equity risk and the concentrated risks of a single industry, including regulation, capital-intensive expansion and sensitivity to interest rates.

As of September 10, VPU closed at approximately $184.01 per share. Its annual distribution was about $5.17 per share, producing a dividend yield of approximately 2.8 percent. The 10-year Treasury yielded approximately 4.93 percent.

Suppose an investor places $10,000 in each investment and holds it for ten years. VPU dividends are reinvested annually. To create a fixed Treasury benchmark, assume the investor purchases a 10-year zero-coupon Treasury yielding 4.93 percent. Unlike a conventional Treasury note, the zero-coupon security makes no interim interest payments and therefore eliminates the need to assume that coupons can be reinvested at the original yield. Also assume that VPU maintains its current 2.8 percent dividend yield, meaning that its dividend per share grows at the same rate as its share price.

The $10,000 Treasury investment grows to approximately $16,181 after ten years.

The critical question is how rapidly VPU must appreciate to reach the same amount.

The Break-Even Case

If VPU’s share price appreciates by approximately 2.1 percent annually, and its dividend grows at the same rate, the $10,000 investment also grows to approximately $16,181.

VPU’s share price would rise from approximately $184 to about $226 after ten years. Its annual dividend would rise from $5.17 to approximately $6.36 per share. Because the dividends are reinvested, the investor would also own more shares at the end of the period.

If VPU maintains a dividend yield near 2.8 percent, annual share-price and dividend growth of approximately 2.1 percent allows it to match a 10-year Treasury yielding 4.93 percent.

Growth above that rate produces a VPU victory. Growth below it produces a Treasury victory.

The Higher Growth Case

Suppose VPU’s share price and dividend both grow by 4 percent annually.

After ten years, VPU’s share price would rise from approximately $184 to about $272. Its annual dividend would increase from $5.17 to approximately $7.65 per share.

With dividends reinvested, the original $10,000 grows to approximately $19,529. That is about $3,348 more than the Treasury’s $16,181.

This outcome does not require spectacular stock-market performance. It requires utilities to deliver moderate, sustained growth while maintaining their current dividend yield. But it is not guaranteed. Higher interest rates, heavy capital requirements, regulatory decisions or disappointing electricity demand could hold down utility valuations and earnings.

The Lower Growth Case

Now suppose VPU’s share price and dividend grow by only 1 percent annually.

After ten years, the share price would rise from approximately $184 to about $203, while the annual dividend would increase from $5.17 to approximately $5.71 per share.

With dividends reinvested, the $10,000 investment grows to approximately $14,573. The Treasury finishes at $16,181, approximately $1,608 ahead.

VPU would still have produced positive income and capital appreciation. It would simply have failed to generate enough growth to overcome the Treasury’s much higher starting yield.

The Choice

The 10-year zero-coupon Treasury offers greater certainty. If held to maturity, its ending value is fixed at purchase and does not depend on future reinvestment rates. By contrast, both VPU’s dividends and its ending share price remain uncertain.

The Treasury’s certainty applies only if it is held to maturity. If interest rates rise after purchase, the market value of the zero-coupon Treasury will fall, potentially substantially, while VPU could also decline because higher rates make its dividend less attractive and raise utilities’ financing costs. An investor who may need to sell before the end of ten years therefore faces interest-rate risk with either investment.

VPU offers less certainty but greater potential. Its current dividend yield is substantially below the Treasury yield, so it needs capital appreciation and dividend growth to close the gap. If both grow by more than approximately 2.1 percent annually, VPU wins. If they grow by less, the Treasury wins.

For an investor who needs a known amount of money in ten years, the Treasury has the stronger claim. For an investor who can tolerate fluctuating prices and expects utilities to produce sustained growth above 2.1 percent, VPU may be the better investment.

At today’s yields, choosing between them is essentially a judgment about whether utilities can produce more than 2.1 percent annual growth in their share prices and dividends over the next decade.

The Treasury’s certainty applies only if it is held to maturity. If interest rates rise after purchase, the market value of the zero-coupon Treasury will fall, potentially substantially, while VPU could also decline because higher rates make its dividend less attractive and raise utilities’ financing costs. An investor who may need to sell before the end of ten years therefore faces interest-rate risk with either investment.

Appendix Calculation Documentation

This appendix documents the model, reproduces the numerical results, and shows why the 2.1 percent break-even estimate is valid under the stated assumptions. Using unrounded inputs, the exact break-even annual growth rate is 2.0624 percent, which the article rounds to 2.1 percent.

Author’s note: Economic and Political Insights is a multi-topic publication covering investing, economic policy and politics. A recent highly read finance article is Should Investors Buy 30-Year Bonds Regardless of the Yield?. Other essays examine health care, taxes, retirement policy and electoral politics. Readers with diverse interests can receive a full year of paid access for $30—50 percent off the regular annual price—using this introductory subscription offer.

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Texas has received considerably more national attention than Minnesota because Ken Paxton’s nomination has given Democrats an unusual opportunity in a traditionally Republican state. Minnesota deserves greater scrutiny because it appears to be a more competitive political environment than Texas.

· Kamala Harris carried Minnesota by only 4.2 percentage points in 2024, while Donald Trump carried Texas by 13.7 points.

Minnesota remains a blue state and Texas a red one, but the most recent presidential results place Minnesota considerably closer to the partisan midpoint.

Minnesota’s open Senate race is shaped by three powerful headwinds.

· Peggy Flanagan must persuade centrists that her agenda is meaningfully different from the socialist one.

· Peggy Flanagan must explain or at least discuss the extensive fraud in state-administered social-service programs during the Walz–Flanagan administration.

· Michele Tafoya must persuade voters that electing her would not simply provide another vote for Trump.

Peggy Flanagan

Flanagan has served as Minnesota’s lieutenant governor since 2019. A citizen of the White Earth Nation, she previously served on the Minneapolis Board of Education and in the Minnesota House of Representatives. If elected, she would become the first Native American woman to serve in the United States Senate.

Flanagan enters the general election after defeating U.S. Representative Angie Craig 59.0% to 39.4% in the DFL primary. Craig offered a more centrist argument based on her record of winning a competitive House district. Their principal differences included:

· Health care: Flanagan supports Medicare for All; Craig favored a public option.

· Immigration: Flanagan attacked Craig’s vote for the Laken Riley Act and called for tearing ICE apart and rebuilding it.

· Israel and campaign support: Flanagan criticized Craig’s support from groups associated with AIPAC, has claimed that Israel is committing genocide in Gaza, and took a more restrictive position on military assistance to Israel.

· Governing record: Craig blamed the Walz–Flanagan administration for failing to prevent extensive fraud in state social-service programs.

Flanagan’s decisive victory confirmed the strength of Minnesota’s progressive DFL coalition. Although she rejects the democratic-socialist label and stops short of some of the DSA’s most radical proposals, she embraces much of its immediately actionable agenda.

Her general-election question is whether Craig’s more moderate and suburban-oriented voters will remain with the party.

Flanagan’s record as lieutenant governor creates another vulnerability. Extensive fraud occurred in state-administered social-service programs during the Walz–Flanagan administration. Flanagan has emphasized that Governor Walz took the lead in responding, while Craig accused her of refusing to accept responsibility. Minnesota lieutenant governors have few independent statutory duties, and there is no evidence that Flanagan personally administered the affected programs. But she was publicly presented as Walz’s governing partner for most of their time in office, making it difficult for her to claim the administration’s accomplishments while separating herself completely from its failures.

That question is complicated by a documented rift between Flanagan and Walz. The two rarely appeared together during the past year and a half, and Walz declined to endorse her in the DFL primary.

Michele Tafoya

Tafoya is a first-time candidate but a familiar public figure. She spent decades as a sports broadcaster, most prominently as an NFL sideline reporter for NBC. After leaving full-time sports broadcasting, she became a conservative commentator.

Tafoya won the Republican primary with 52.1%, defeating convention-endorsed former Navy SEAL Adam Schwarze, who received 24.0%, and 2024 Senate nominee Royce White, who received 11.2%.

Her majority demonstrated the value of statewide name recognition and showed that her abortion-rights position and acceptance of the 2020 election were not disqualifying among Republican primary voters. It did not, however, establish how much distance she is prepared to put between herself and Trump in the general election.

Tafoya entered the campaign as the Republican with the greatest statewide name recognition. She has emphasized government fraud, public safety, immigration enforcement, manufacturing and political accountability. Her principal Minnesota-focused argument is that the DFL administration failed to prevent large-scale fraud in publicly funded programs. Because Flanagan has served as lieutenant governor throughout the Walz administration, Tafoya argues that she shares responsibility for those failures.

Tafoya differs from much of the national Republican Party on some questions. She describes herself as pro-choice and has said there is room in the Republican Party for supporters of abortion rights. She accepts the result of the 2020 presidential election and distinguishes between illegal immigration and legal immigration. She has also said that she is running her own campaign rather than serving as an extension of Trump.

Those differences coexist with significant areas of alignment. Tafoya said she would welcome Trump’s endorsement. She has defended his economic record, supported his military policy toward Iran and generally aligned herself with Republican arguments on immigration enforcement. When asked whether Trump should be permitted to impose tariffs unilaterally, she declined to take a position.

Tafoya’s challenge is therefore not simply to establish that she is personally different from Trump. Voters will also want to know how she would vote when his policies conflict with Minnesota’s agricultural, manufacturing or institutional interests—and whether she can offer practical alternatives on health care, climate change and Middle East peace, where neither the Trump agenda nor the democratic-socialist agenda is likely to produce sufficient progress.

Flanagan gives Tafoya openings, particularly on health care and Israel. Medicare for All is neither politically feasible nor adequately attentive to the cost and disruption of replacing employer-sponsored insurance. Yet simply defending the Republican record is not enough: the health-care system remains unaffordable for many families, and the expiration of the enhanced ACA subsidies has made matters worse. Tafoya needs an alternative that expands coverage while controlling costs. I have proposed one in “A Durable Path Forward on American Health Care.”

Flanagan’s description of the Gaza war as genocide and her support for restricting weapons to Israel may also place her outside the comfort zone of many Minnesota voters, particularly Jewish Democrats. Progressive denunciations that minimize Israel’s security concerns do not bring peace closer; they can encourage Palestinian leaders to believe that continued resistance will eventually deprive Israel of American support. Representative Haley Stevens recently made a similar point, questioning what Senator Bernie Sanders’s increasingly strident rhetoric had accomplished for Middle East peace. (Fox News report)

Tafoya should also ask whether Flanagan’s spending commitments are sustainable as Social Security and Medicare approach trust-fund depletion and automatic reductions in scheduled benefits. The argument that Congress needs pragmatic problem-solvers—not one more ideological senator—as it confronts these looming cuts is compelling.

Trump’s tariffs provide another test of Tafoya’s independence. They are especially consequential in Minnesota because Canada is the state’s largest trading partner, purchasing roughly $5.5 billion in Minnesota exports annually. Some Republicans have broken with Trump on this issue: Colorado Representative Jeff Hurd was one of six House Republicans who voted to terminate Trump’s tariffs on Canada.

Tafoya’s support for legal immigration establishes part of her position, but it does not answer the separate controversy surrounding the Trump administration’s ICE tactics. Opposition to those actions gives Democrats a powerful tailwind. Demonstrating that she is more reasonable than Flanagan may therefore not be enough; voters will also want to know where Tafoya’s own limits lie.

At the same time, Tafoya can identify Trump policies she supports and propose building upon them. She could favor expanding federal contributions to Trump Accounts so that more children begin adulthood with meaningful savings, while extending the tax relief for tips beyond its scheduled expiration. That would allow her to demonstrate independence without defining independence as opposition to Trump on every issue.

Minnesota could therefore become an overlooked competitive race. Flanagan’s progressive positions and the fraud controversies surrounding the Walz administration create genuine vulnerabilities.

Politics should be about more than creating contrasts. It should include a serious discussion of how the country moves forward. Tafoya can make this a race if she shows not only where she differs from Trump, but also what she would do differently—and how her alternatives would produce more progress than either Trump’s program or Flanagan’s.

I would also like to see Tafoya go further by advocating fiscally responsible improvements to health care and student debt along the lines I have outlined in my own work. With fewer than 60 days before the election, complex proposals may appear politically inconvenient. But asking when it is convenient to introduce a difficult policy is rather like asking when it is convenient to have a baby. If the problem is real and the work is necessary, perpetual postponement is not a solution.

Sources

· Minnesota Secretary of State: August 11, 2026 U.S. Senate primary results

· Peggy Flanagan campaign platform, including positions on Israel, health care, student loans and immigration

· Minnesota Public Radio comparison of Flanagan and Craig

· Minnesota Star Tribune comparison of Flanagan and the DSA

· NOTUS interview with Michele Tafoya

· Minnesota Public Radio report on the Craig–Flanagan debate and fraud

· Minnesota Star Tribune report on the Flanagan–Walz rift

· Jewish Insider report on Flanagan, Craig, AIPAC and Democratic divisions over Israel

· Jewish Telegraphic Agency assessment of Flanagan’s Israel positions and differences from Abdul El-Sayed

· Minnesota Public Radio profile of the Flanagan–Tafoya general-election matchup

Crucial Races

• Four Pennsylvania House Races That Could Help Decide the Majority

• September 11 — Virginia’s Second District

• September 9 — Minnesota Senate

• September 7 — New York’s 17th District

• September 6 — Colorado’s 8th District

• September 4 — Washington’s 3rd District

Author’s Note: I am working on a series the Race of the Day, which appears most days with some gaps for when I must finish a consulting or policy task. Go here for a discussion of the race in NY-17 between Conley and Lawler. For readers interested in my broader policy agenda, see If I Were Speaker: A Tax Reconciliation Agenda, which lays out proposals on health care, student debt, capital gains taxation and retirement policy. Also, this post on the fiscal cliff, which will next be reached right before a funding crisis impacting Social Security is a must read for any future Senator or staff member.

I’m also offering new paid subscribers for only a short while a 50% off their first-year coupon. Paid subscriptions support this work and provide access to my more detailed policy and economic analysis.

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The nation’s fiscal policy is increasingly dominated by fiscal cliffs – several temporary tax and spending provisions applied to major, substantive and often important programs, which expire nearly simultaneously. Fiscal cliffs can be chaotic due to plausible threats of large tax increases or the elimination of valuable benefits if one party or the other does not get its way. This process makes sustainable progress on deficit reduction and entitlement reform much more difficult.

A fiscal cliff is a date established by current law on which taxes or government spending change abruptly unless Congress intervenes. It is not simply a large deficit. A structural deficit develops over time because recurring spending exceeds recurring revenue. A fiscal cliff concentrates important changes around a particular deadline and forces elected officials to decide whether current law should take effect.

A fiscal cliff also differs from a government shutdown or a debt-limit confrontation. A shutdown occurs when appropriations lapse and agencies lose authority to continue many operations. A debt-limit crisis occurs when the Treasury approaches the limit on authorized federal borrowing. A tax-policy cliff occurs because a deduction, credit, rate or other rule has been written to expire or change on a specified date.

If Congress does nothing, previous law takes effect automatically, often producing a large and abrupt tax increase for affected households. That was the threat at the end of 2025, when many of the individual provisions of the 2017 tax law were scheduled to expire. Congress ultimately prevented most of those increases by making the provisions permanent in the 2025 reconciliation law.

But Congress does not always defuse the time bomb. The enhanced Affordable Care Act premium tax credits also expired at the end of 2025. Their lapse caused substantial increases in net premiums, disrupted household budgets and left some families reconsidering whether they could afford coverage.

Fiscal cliffs therefore create two unattractive possibilities: a hurried agreement that extends popular benefits without sustainable financing, or political deadlock that allows abrupt tax increases or benefit losses to occur. Either outcome encourages chaos rather than deliberate fiscal policy.

The modern history of fiscal-cliff budgeting begins in earnest with the 2001 Economic Growth and Tax Relief Reconciliation Act. Temporary tax provisions had existed long before George W. Bush became president. Congress had used them for surcharges, investment incentives, emergency relief and targeted credits. The 2001 law was different because it placed most of a major individual tax overhaul on a single expiration schedule.

The institutional background was the Byrd Rule, which originated in 1985 and was later incorporated into the Congressional Budget Act. Reconciliation allows qualifying tax and spending legislation to pass the Senate without the ordinary 60 votes needed to end debate. The Byrd Rule, however, allows senators to challenge provisions that increase deficits beyond the period covered by the reconciliation measure.

Congress could have responded by reducing the size of the Bush tax cuts, financing them with permanent offsets, or obtaining 60 votes to waive the objection. Instead, it used a sunset. The tax reductions would formally disappear before they produced deficits outside the applicable budget window.

The 2001 law reduced individual tax rates, enlarged the child credit, addressed marriage penalties, expanded retirement incentives and changed the estate tax. Yet these provisions were generally scheduled to expire after 2010. Supporters of the law did not necessarily expect or desire the pre-2001 tax code to return. The sunset made it possible to enact a broad tax program through reconciliation while limiting the long-term deficit officially attributed to the legislation.

The estate tax provided the clearest illustration of the resulting policy incoherence. It was gradually reduced, repealed for 2010 and scheduled to return in 2011. That sequence was not a plausible permanent tax policy. It was the product of fitting the legislation within a limited budget window.

There is considerable irony in this result. The Byrd Rule was intended in part to protect the long-term budget from deficit-increasing legislation passed through a simple-majority process. The response was not to finance the legislation permanently. Congress instead complied formally by writing an expiration date into the law while creating benefits that supporters expected future Congresses to continue. A rule intended to encourage fiscal discipline helped produce a new source of fiscal instability.

The law also demonstrated the political power of temporary tax relief. Once taxpayers adjusted to lower rates and larger credits, expiration could be portrayed as a tax increase, even though the return to prior law had been written into the original legislation. The statutory burden remained on supporters to enact an extension. The political burden shifted toward those prepared to allow the tax reductions to expire.

When the original deadline approached, Congress did not permit the full tax law to revert. In 2010, it extended the Bush tax provisions for two more years. That moved the deadline to the end of 2012.

The new deadline then converged with the expiration of temporary payroll-tax relief and emergency unemployment benefits, the scheduled onset of automatic spending reductions and other changes. The combination became known as the “fiscal cliff.” Federal Reserve Chairman Ben Bernanke warned Congress in 2012 that allowing all the scheduled tax increases and spending cuts to take effect at once would threaten the still-fragile economic recovery.

Congress again declined to allow current law to operate fully. The American Taxpayer Relief Act, enacted at the beginning of 2013, made most of the Bush tax changes permanent for taxpayers below specified high-income thresholds while allowing the top income-tax rate to rise.

The sequence established the modern fiscal-cliff pattern: enact tax benefits temporarily, allow taxpayers to become accustomed to them, extend them as the deadline approaches and eventually make many of them permanent. What appears temporary in the statute can become presumptively permanent in political practice. The expiration date postpones the fiscal decision without necessarily changing its ultimate outcome.

Republicans did not remain the only party willing to use temporary provisions. Democrats employed them for pandemic-era expansions of the Child Tax Credit, the child and dependent care credit, the Earned Income Tax Credit and Affordable Care Act premium assistance. Republicans again made extensive use of sunsets in the 2017 tax law and the 2025 reconciliation law. Both parties have also supported recurring packages of narrower business and individual tax extenders.

The motivations are not always identical. A provision enacted during an emergency may reasonably be temporary because the emergency is expected to end. A narrowly targeted credit may be structured as a trial. Reconciliation provisions may expire because their sponsors cannot assemble the revenue offsets or Senate votes required for permanence. Temporary provisions can also reflect choices among competing priorities within a limited budget package: shortening the duration of several programs allows lawmakers to include more of them while recording only the costs incurred before they expire. Those differences matter when judging the underlying policies.

Nevertheless, both parties have learned the same legislative technique: offer a visible benefit now, record only its cost through the expiration date and leave a future Congress to determine whether the benefit should continue. That can make a policy easier to enact, but it can also conceal its longer-run cost and encourage households and businesses to organize their affairs around a supposedly temporary provision. Neither party has developed a reliable process for financing, evaluating, extending or terminating these policies when the deadline arrives.

The ACA episode shows both the attraction and the danger of this approach. Democrats initially expanded the premium tax credits for 2021 and 2022 as part of the pandemic-era American Rescue Plan. The Inflation Reduction Act subsequently extended them for only three more years, through 2025. At the same time, Democrats chose to devote substantial budgetary resources to climate and clean-energy incentives, prescription-drug changes and other priorities while also presenting the legislation as reducing the deficit.

Democrats therefore made a consequential choice. They could have made permanent premium assistance a higher priority by reducing other parts of the package, raising additional revenue or accepting less deficit reduction. Instead, Democrats extended the credits for only three years while devoting substantial resources to climate and clean-energy incentives and other priorities.

In hindsight, that choice was a serious mistake. A party cannot design major social policy on the assumption that it will remain in power when the expiration date arrives. Making the credits permanent would not have made them impossible to repeal, but it would have changed the political and legislative burden. Opponents would have had to assemble the votes to take an existing benefit away. Because the credits were temporary, opponents needed only to do nothing.

The ACA episode consequently shows that a sunset is not merely an accounting device. It is a transfer of power to a future Congress. Democrats created a benefit on which millions of households came to depend, but they also created the mechanism by which that benefit could disappear automatically. After control of Congress changed, they could not compel another extension. The party that creates a temporary benefit is betting that a future Congress—possibly controlled by its opponents—will agree to continue it. Both parties understand the immediate legislative advantage of that wager. Neither has adequately confronted its fiscal and human consequences when the wager fails.

The 2025 reconciliation law, commonly called the One Big Beautiful Bill, removed much of the uncertainty surrounding the scheduled expiration of the 2017 individual tax provisions. It permanently extended the lower individual income-tax rates and many other features of the 2017 law. But it combined those permanent changes with another collection of temporary benefits.

The law also demonstrated how vulnerable temporary provisions become after political control changes. It terminated or accelerated the expiration of numerous clean-energy incentives created, expanded or extended during the Biden administration. The IRS identified eight consumer, vehicle and building provisions scheduled to end between September 2025 and June 2026, including credits for new and used electric vehicles, residential clean-energy investments and energy-efficient home improvements. Other business and energy incentives were shortened or subjected to earlier phaseouts. Republicans did not have to repeal a permanent Biden-era settlement all at once; they could dismantle policies that already carried expiration dates or whose durability had never become politically established.

Yet the bill created a new set of Republican provisions scheduled to sunset. Most expire after 2028, followed by another significant change in 2030:

· The deduction for qualified tips expires after 2028. This is an income-tax deduction subject to eligibility rules and limits, not a universal exemption of tips from all federal taxes.

· The deduction for qualified overtime compensation expires after 2028. It does not cover every dollar earned by someone who works additional hours; its operation depends on the statutory definition of qualifying overtime compensation.

· The deduction for interest on qualifying car loans expires after 2028. Eligibility depends on the vehicle, final assembly, loan, income and personal-use requirements.

· The additional deduction for eligible taxpayers age 65 and older expires after 2028. Although promoted as relief from taxes on Social Security, it is a separate deduction rather than a repeal of the rules taxing Social Security benefits.

· The federal Trump Account pilot contribution is limited to eligible children born from 2025 through 2028. The underlying account structure is separate from this temporary $1,000 federal deposit.

· The temporarily increased cap on the state and local tax deduction applies through 2029 and is then scheduled generally to return to $10,000 in 2030. Its benefits are geographically concentrated and available only to households that itemize deductions. Its supporters in high-tax states, however, have already demonstrated that they can make the SALT limit central to negotiations over a broader tax package.

The IRS provides additional details on the effective periods and eligibility restrictions for the temporary deductions. IRS: Working Families Tax Cuts—Individuals and Workers

These provisions differ in size, distribution and economic justification. Some may deserve extension; others may not. But each creates a constituency that can describe expiration as a tax increase or a withdrawn benefit: a penalty on tipped or overtime work, a burden on seniors or car buyers, the loss of a financial start for newborn children, or a major tax increase in high-tax states. Current budget projections assume that the provisions will end as scheduled, while political debate is likely to proceed as though allowing them to end would be unacceptable. The argument will therefore focus less on whether each provision is the best use of limited federal resources than on who should be blamed for its expiration.

The timing is particularly unfortunate. Under the 2026 Trustees’ intermediate projections, the Social Security Old-Age and Survivors Insurance fund will deplete its reserves in the fourth quarter of 2032. Continuing income would then cover about 78 percent of scheduled benefits. The combined retirement and disability funds are projected to deplete their reserves in 2034, although combining their finances would itself require legislation. Medicare’s Hospital Insurance fund is projected to deplete its reserves in the second quarter of 2033, after which dedicated revenue would cover about 89 percent of scheduled expenditures.

Avoiding abrupt reductions will require Congress to increase dedicated revenue, reduce the growth of benefits or provider payments, transfer general revenue, authorize additional borrowing, or adopt some combination of those approaches.

Congress will also face significant procedural obstacles. Social Security cannot be changed through reconciliation because Section 310(g) of the Congressional Budget Act specifically excludes it. A Social Security agreement would therefore ordinarily have to pass through the regular legislative process and attract the 60 Senate votes needed to overcome a filibuster. Medicare is not categorically excluded from reconciliation, although the Byrd Rule can prevent the inclusion of provisions whose budgetary effects are merely incidental to their broader policy purposes. A comprehensive solution involving both programs will almost certainly require bipartisan support.

The outcome of failing to reach such an agreement is difficult to predict. Congress could permit severe benefit or provider-payment reductions, with potentially serious consequences for poverty, access to medical care and economic growth. Alternatively, it could rely heavily on general revenue and additional borrowing, increasing interest costs and the risk of bond-market disruption. The temporary tax provisions are small compared with these entitlement shortfalls, but their expirations will consume revenue, political attention and negotiating capacity just as the much larger Social Security and Medicare decisions become unavoidable.

Both parties rely on sunsets because they make present legislation easier, but an expiration date neither finances a permanent policy nor provides a credible plan for ending it. It merely transfers the decision—and its political and fiscal risks—to future taxpayers, beneficiaries and members of Congress. The convergence of the 2028–2030 tax expirations with the approaching Social Security and Medicare shortfalls will test how long Washington can continue treating a deadline as a substitute for a decision.

Some background material:

Joint Committee on Taxation, List of Expiring Federal Tax Provisions, 2025–2035:

https://www.jct.gov/

Social Security Administration, 2026 Trustees Report materials: https://www.ssa.gov/OACT/TR/

Centers for Medicare & Medicaid Services, 2026 Medicare Trustees Report materials: https://www.cms.gov/oact/tr/

Internal Revenue Service, Working Families Tax Cuts guidance: https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions

U.S. Senate Budget Committee, explanation of the Byrd Rule:https://www.budget.senate.gov/about/budget-process

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New York’s 17th District should be almost tailor-made for centrist politics. Instead, Republican Mike Lawler and Democrat Cait Conley—two candidates with substantial résumés and relatively moderate profiles—are increasingly fighting a nationalized campaign centered on Donald Trump, Democratic socialists and Defense Secretary Pete Hegseth.

The district sits immediately north of New York City and includes all of Rockland and Putnam counties and parts of Westchester and Dutchess counties. It is affluent, highly suburban and politically competitive. The district also contains a significant Jewish population, including large Orthodox and Hasidic communities in Rockland County.

Its recent electoral history illustrates just how competitive it is. Lawler first won the seat in 2022 by defeating Democratic Congressional Campaign Committee chairman Sean Patrick Maloney, 50.3–49.7. In 2024, Kamala Harris narrowly carried the district, roughly 50–49, while Lawler simultaneously defeated former Democratic congressman Mondaire Jones 52.2–45.9. Lawler is one of only three House Republicans representing districts Harris carried in 2024.

Two unusually substantial candidates

Lawler is a lifelong Hudson Valley resident and Manhattan College graduate with degrees in accounting and finance. Before Congress, he served in the New York State Assembly, as deputy town supervisor in Orangetown and as executive director of the New York Republican Party. In Congress, he serves on the House Financial Services and Foreign Affairs committees.

His legislative record deserves more attention than the campaign’s daily partisan combat sometimes suggests. Lawler has worked on housing, financial regulation and other bread-and-butter issues. Six bipartisan housing bills he authored were incorporated into the 21st Century ROAD to Housing Act, which passed Congress overwhelmingly and became law this summer. The measures address subjects including middle-class housing, public-housing accountability, housing accessibility and community development. He has also worked across the aisle on financial and retirement issues.

In other words, whatever one thinks of Lawler politically, lack of substance is not really the issue.

Conley has an equally striking, although very different, résumé. A fourth-generation Hudson Valley native, she graduated from West Point in the top 2 percent of her class, spent 16 years on active duty in the Army and deployed overseas six times, including service in Iraq and Afghanistan. She later attended graduate programs at Harvard and MIT and served in counterterrorism roles on the National Security Council and at the Cybersecurity and Infrastructure Security Agency.

Conley also had to win a competitive Democratic primary. Five Democrats made the June ballot. She won 48.9 percent of the vote, comfortably defeating Rockland County legislator Beth Davidson, who received 31.4 percent, and Effie Phillips-Staley, who finished third with 15.1 percent. Lawler was unopposed for the Republican nomination.

If both are centrists, why doesn’t the campaign sound centrist?

That may be the most interesting question in this race.

Conley appeared on CNN Sunday and said she would support articles of impeachment against Hegseth, calling him a hazard to American national security. Given her military and national-security background, her criticism of Hegseth is hardly surprising, and I understand the sentiment. But poor performance—even in a position as crucial as secretary of defense—is not by itself sufficient grounds for impeachment. The Constitution establishes the standard as “Treason, Bribery, or other high Crimes and Misdemeanors.”

House Democrats who have already introduced impeachment articles against Hegseth allege specific misconduct, not simply incompetence. But based on the case Conley made Sunday, I remain unconvinced that removal through impeachment follows simply from the argument that Hegseth has performed badly or endangered national security through poor judgment. Turning criticism of Hegseth into an impeachment argument inevitably moves the discussion into much more partisan territory.

Republicans, meanwhile, are trying to tie Conley to New York’s increasingly influential socialist left. Conley has said she will not campaign with figures such as Mayor Zohran Mamdani or Alexandria Ocasio-Cortez, but she has stopped short of a broader repudiation of the Democratic Socialists of America. That distinction could matter in suburban New York, where the recent success of Mamdani and other candidates associated with the socialist left gives Republicans an obvious line of attack.

Lawler has the mirror-image problem. He has repeatedly presented himself as an independent-minded Republican and can point to a bipartisan legislative record and occasions when he has challenged Trump, including during negotiations over the SALT deduction. Yet Lawler is scheduled to speak at this week’s Republican midterm convention in Dallas alongside a heavily Trump-oriented lineup. Trump himself is scheduled to address the convention, whose organizers have made mobilizing Trump voters a central objective.

So what do we have here? Lawler, a candidate who can’t or won’t break ties with Trump, and Conley, a candidate who can’t or won’t fully separate herself from the socialist left.

NY-17 is a curious contest: two candidates whose biographies and records suggest moderation and substantive governing experience, but whose campaigns are increasingly being pulled toward national partisan conflict. The two candidates in WA-3 appear to have done a better job asserting their independence from their parties than the two candidates in NY-17.

Author’s Note: For readers interested in my broader policy agenda, see If I Were Speaker: A Tax Reconciliation Agenda, which lays out proposals on health care, student debt, capital gains taxation and retirement policy.

I’m also offering new paid subscribers for only a short while a 50% off their first-year coupon. Paid subscriptions support this work and provide access to my more detailed policy and economic analysis.

Crucial Races

• Four Pennsylvania House Races That Could Help Decide the Majority

• September 11 — Virginia’s Second District

• September 9 — Minnesota Senate

• September 7 — New York’s 17th District

• September 6 — Colorado’s 8th District

September 4 — Washington’s 3rd District

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I skipped yesterday’s Race of the Day to finish a finance article. Today I return closer to home: Colorado’s 8th Congressional District, just north of Denver, where I live.

Colorado’s 8th is the state’s newest congressional district, created after Colorado gained an additional House seat following the 2020 census. It runs from the northern Denver suburbs through Adams and Weld counties toward Greeley, combining a large Latino population and Democratic-leaning suburbs with more Republican agricultural communities farther north. Hispanics or Latinos made up 38.5% of the district’s population when the current lines were drawn.

And competitive hardly begins to describe it.

This is only the district’s third congressional election.

In 2022, Democrat Yadira Caraveo, a physician and former state legislator, became its first representative, defeating Republican Barbara Kirkmeyer 48.4% to 47.7%.

Two years later, Republican Gabe Evans defeated Caraveo 49.0% to 48.2%. In both elections, the winner received less than 50% and prevailed by less than one percentage point.

Once again, CO-08 is among the country’s most closely watched House races, featuring two very different candidates.

Gabe Evans, the Republican incumbent

Evans, 40, has a résumé rooted in the military, law enforcement and emergency response.

He spent 12 years in the Army and Colorado Army National Guard, flew Black Hawk helicopters, served during Operation Enduring Freedom, and commanded aviation units involved in Colorado wildfire response and search-and-rescue missions. He then spent more than a decade with the Arvada Police Department, rising to lieutenant. Evans and his wife also operate a family farm in Weld County.

Politically, Evans has supported President Trump on many major issues and was endorsed by Trump in both 2024 and 2026. Evans, however, rejects the characterization that he follows the administration in lockstep. He points to bipartisan legislation and his membership in the Problem Solvers Caucus, while identifying several areas where he has disagreed with Trump administration policy.

Manny Rutinel, the Democratic challenger

Manny Rutinel, 31, could hardly have followed a more different path.

Raised by a single immigrant mother, he worked at McDonald’s, studied economics and microbiology, earned a master’s in applied economics from Johns Hopkins and a Yale law degree, and worked as an economist for the Army Corps of Engineers before entering the Colorado legislature.

Rutinel also has a long record of political and issue activism.

As a University of Florida student in 2014, he participated in a demonstration connecting police brutality in Ferguson with the treatment of Palestinians in Gaza. The demonstration included Students for Justice in Palestine among its organizers. Rutinel’s campaign has said he was never affiliated with SJP and attended the demonstration to protest police brutality in the United States.

At Yale in 2019, Rutinel joined protesters who entered the field during the Harvard-Yale football game to demand that the universities divest from fossil fuels. He was charged with disorderly conduct; the charge was later dropped. His work at Yale also concentrated heavily on animal and environmental law, including proposals to use carbon-offset credits to encourage farmers to transition from animal agriculture toward plant production.

Those positions are potentially significant in a district containing major oil-and-gas production as well as substantial agricultural interests. Weld County has historically accounted for the overwhelming majority of Colorado crude-oil production.

Rutinel has since changed several positions. As recently as July 2025, he supported banning fracking, canceling student debt and creating a single-payer health-care system. During this campaign, he has opposed a fracking ban, rejected blanket student-debt cancellation and favored exploring a public option rather than Medicare for All.

Karl Rove highlighted this vulnerability in his July Wall Street Journal column, “Socialists Spell Trouble for Democrats,”arguing that progressive primary victories may be relatively painless in deep-blue districts but create different political challenges elsewhere. Rutinel was among the Colorado candidates Rove discussed.

Rutinel did not simply inherit the nomination. Democratic primary voters had a sharply different alternative.

Former state Rep. Shannon Bird presented herself as the pragmatic candidate with a record of bipartisan legislating. She had served seven years in the Colorado House and chaired the powerful Joint Budget Committee. The independent Center for Effective Lawmaking ranked Bird the most effective Colorado state legislator in the 2023–24 legislative session.

Yet Democratic voters chose Rutinel overwhelmingly: roughly 61–62% to Bird’s 34%, with military veteran Evan Munsing receiving about 5%. Rutinel ran as the more progressive candidate, while Bird emphasized a more moderate political profile and argued that it would appeal to unaffiliated and swing voters.

That result occurred alongside other progressive victories in Colorado’s June primaries, most notably Melat Kiros’s defeat of longtime Denver Rep. Diana DeGette. Republicans have since openly attempted to tie Rutinel and other Colorado Democrats to Kiros.

Libertarian Dave Wood is also running. In a district whose first two elections were decided by only a few thousand votes, third-party voting bears watching. In 2022, the Libertarian candidate received more than 9,200 votes while Caraveo’s margin over Kirkmeyer was about 1,600 votes; in 2024, two minor-party candidates together received more than 9,000 votes while Evans’s margin over Caraveo was about 2,500.

Colorado 8 provides a striking contrast with my September 4 Race of the Day, Washington’s 3rd District.

Both are closely divided districts, but Washington 3 produced two candidates with relatively moderate political profiles. Colorado 8 produced a Republican who has supported Trump on many of the administration’s major priorities and a Democrat whose earlier positions on several issues were substantially to the left of those he now emphasizes.

That raises a larger question with broader 2026 implications:

Why do some closely divided districts nominate candidates oriented toward the political center, while others produce much sharper ideological choices?

President Trump’s current standing gives Democrats an issue they are trying to exploit nationally and in Colorado 8. Recent polling also shows substantial dissatisfaction with Trump among Latino voters in the district. At the same time, Rutinel’s decisive primary victory over a more moderate Democratic alternative makes Colorado 8 an unusually useful test of whether a candidate with a distinctly progressive political history can assemble a winning coalition in one of the country’s most evenly divided districts.

Author’s Note: For readers interested in my broader policy agenda, see If I Were Speaker: A Tax Reconciliation Agenda, which lays out proposals on health care, student debt, capital gains taxation and retirement policy.

Crucial Races

• Four Pennsylvania House Races That Could Help Decide the Majority

• September 11 — Virginia’s Second District

• September 9 — Minnesota Senate

• September 7 — New York’s 17th District

• September 6 — Colorado’s 8th District

• September 4 — Washington’s 3rd District

I’m also offering new paid subscribers for only a short while a 50% off their first-year coupon. Paid subscriptions support this work and provide access to my more detailed policy and economic analysis.

Subscribe now

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