On Friday, as votes continued to be counted in the wake of the most contentious U.S. election in generations, Investable Universe sat down for a podcast interview with longtime political journalist John Ellis on the Trump era, the Biden transition, a fractured U.S. governance landscape, and the outlook for covid-19.
Ellis previously worked for NBC News, the Boston Global, CNBC, Fox News Elections and Business News and Newscorp. He also served as a Senior Fellow at Harvard’s Institute of Politics and was a Senior Fellow at the Combating Terrorism Center at West Point (2002-2004), where he was awarded the Outstanding Civilian Service Award by the U.S. Army for his work on “Future Threats.” Today he is the publisher of News Items, a daily newsletter that covers global politics, financial news, advanced technologies and science.
At the time of the interview, election returns pointed to victory for Democratic Challengers Joe Biden and Kamala Harris. Their win was confirmed the following day (although Trump had, as of Investable Universe’s Monday editorial deadline, refused to concede).
Ellis offered his thoughts on the surprising Republican performance—highest office nothwithstanding. He discussed the financial future of both parties, and predicted that private equity could be for a rude awakening from both sides of the congressional aisle in 2021. He also, surprisingly, recalled being part of an organized effort to warn President Donald Trump about the imminent danger of covid-19 as early as January 2020.
The following is a partial transcript of the interview. The excerpt has been edited for length and clarity:
Investable Universe (IU:) Now, this is not your first time at the rodeo. So how shocked are you by what has unfolded in the past few days?
John Ellis: (JE): Well, politically, I was shocked that the Republicans did so well, I mean, all we all we heard leading up to the election was ‘blue wave’ or, you know, kind of like a half wave or a pull away or whatever. But the fact is, the Republicans did very, very well.
They say it looks like they [Republicans] will defend the majority in the Senate. Obviously, Georgia can go the other way, but my guess is that they’ll do well there. So if I’m right, they successfully defended their majority in the Senate. They gained seats in the House, everybody expected them to lose between 10 and 15 [seats]. They gained seats. They did very well in the gubernatorial races that were on the ballot. There weren’t many of them. And they did very well down-ballot for a state Senate state legislature. So, all in all, they did very well.
And, of course, President Trump, who was said to be, you know, eight to 10 points behind, nationally and behind, you know, a lot in individual states that would decide the outcome did extraordinarily well. Turned out his campaign—And I think he personally—really turned out an enormous percentage of his…base and he came very close to winning. I mean, it was an astonishing performance. And I would if I were a Democrat, I guess…it’s safe to say that you’d be happy that Trump is gone. But I would be very concerned about what happened down the ballot.
Polls—What’s the point?
IU: So, a question on the polls heading into the election. It seems that that the numbers underneath—the poll science—is off once again. To what do you attribute this miss in the numbers?
JE: I mean, I think that the last election, everybody was like, ‘Whoa, how did we miss it? I think this one is, well, it doesn’t work. And pretending that it does is no longer viable. I mean, what happened in the last seven days of the election was an epic fail on the part of what people call the polling industry.
But I think what happens is, the refusal rates are very, very high. So, if you make one hundred calls, you get five people that will cooperate. And so these things about the error margin being two percent or three percent or four percent, I think is complete nonsense. I really do. But even if you take it at face value, you and I run for Congress and we tie at 45 (percent projected) in the poll. That can be 49/41 your way or my way, right? So there’s the margin of error, a factor that people don’t really understand. I mean they look at it. 48/46, they say somebody is ahead by two but that’s not even close to being true.
So, so there’s that. And then, I think, the refusal rate is a problem…When I started, it was all landline [communications], you could reach people where they live, and so forth. I live in Connecticut, but I have a 914 area code on my mobile phone from when we lived in New York…so there’s a whole location problem. And then we we don’t really want to hear from people. So we have all these defenses…one [of which is that calls] come up as a ‘spam call.’ So that doesn’t work.
And then probably the most important thing, is that very conservative voters and Trump voters—were which were basically the same thing this time around—they don’t want to participate. They think the media and all this stuff is some kind of, you know, it’s not their thing. It’s not on their side. So they don’t participate. And back in the days when…most people voted in person, I was part of the NBC News Election and we would interview people coming out of the polls, every seventh person at this precinct and every ninth person at this other precinct. And we had an enormous problem, because the very conservative voters just would say, ‘No, I’m not going to participate.’ And so that problem persisted from from the time I was at NBC, in 1980-1984-88 [up to] to 2016.
IU: That was the Reagan era, and it was not far enough [to the right for conservative voters]?
JE: It wasn’t that. I mean, they were perfectly happy to vote for Reagan, but they didn’t want to participate with…an organization that they perceived as being against Reagan. And the news media was critical of Reagan throughout his administration.
Great, a “gridlock” rally
IU: OK, so it’s not official yet, but it does look like Biden is going to be the next president. The market has moved higher in the past few days, in the expectation that the Senate will remain Republican-controlled and that there will be a Democrat in the White House, which spells gridlock. Why is this good news for the markets? Why would investors think this is a good thing?
JE: Well, I think the first is that…on the taxes, I don’t think that that would get through a Republican Senate. So they’re probably happy with that. Generally speaking, divided government means that not much can happen. And if you’re if you’re Wall Street or whatever, that’s probably a good thing. Not a bad thing.
The second thing is that both the Biden Administration and now Senator McConnell, assuming he’s still the majority leader, will want to do a second wave of stimulus. And so that, I would think, would make Wall Street happy.
The third thing is you now have in the Biden administration, people who will address seriously—and I mean very seriously—the second wave and what’s going to be a third wave of the pandemic. And I think that will give people confidence [because] this thing is very close to spinning completely out of control.
IU: When you say ‘this thing,’ do you mean the United States (as a whole)?
JE: No, I mean the virus. And I think I mean, I think in some of these Midwestern cities, there’s going to be no place to go in terms of the hospitals. We’re very close to being overwhelmed by it. And so having an administration that believes in the science and takes [it] seriously—I think it gives the markets confidence.
“Subsidize the hell out of health care”
IU: OK, so what do you think is going to be is going to be needed to help the Midwestern states, for example, to make it through this? There are so many aspects of the health care infrastructure in large swaths of the US that have been underfunded, under-invested. There’s a lot of issues coming to bear with covid.
JE: You have to you have to just massively subsidize health care. Right? I mean, at least for a year or two or three. I think that’s fine, by the way. I think the science by 2030 will have cured or fixed a lot of disease, including…diabetes and blood pressure and so on, so forth. So subsidizing the hell out of health care is good.
IU: And you think Republicans will let that happen?
JE: Well, you know, if people start dying, you know, it’s not good for the party. And they will be dying. As you know, the infection rate goes…and then lagging behind it is the death rate. So anyway…subsidize the hell out of it. And then there’s part B, which is just sort of good practices, right? There’s social distancing, masks and that stuff. And then I think if it really gets out of hand, which doctors and scientists that I talk to think that it might get out of hand, then I think you go to a 30 day lockdown. You basically say on January 1 [that] it’s January 1 for 30 consecutive days, you don’t pay any bills….nothing, which is what China essentially did, and it worked. So, we’ll see.
IU: Do you think that now that the election is over, that these measures will be less politicized in a sense?
JE: I think pandemic fatigue is really a problem. And personally, I think the only way to address that problem is to go into the ‘January-1-For-30-Consecutive-Days’ solution, because then you have a national effort and you also but the pressure is off you to pay bills and so on and so forth…
The thing that’s working against it is pandemic fatigue. And, you know, I don’t think there are a lot of people that don’t want to spend time with their family on Christmas or Thanksgiving or whatever. So that’s that’s a problem.
IU: Do you think that we might be looking at something like that in in the U.S. or do we have the ability to get ahead of it by saying, OK, Thanksgiving, if people are traveling and seeing their families and starting to celebrate the holidays, that’s a real danger sign. What’s your take on that?
JE: I think that the Trump administration has bungled this from the beginning. I was part of an effort in January to convince them to take it seriously, which they did not do. And so I don’t I don’t hold out any hope for a reversal of sort of confidence. This is tough because it’s such a big country and you have hospitals being overloaded. And South Dakota doesn’t really mean anything to people on the East Coast. But the United States of America, particularly the middle part of the United States of America, is in a really bad place and it could get really much, much worse. So fingers crossed, I guess.
IU: Why do you think the Trump administration was unwilling to take the threat seriously in January, despite your efforts and those of others?
JE: I mean, my contribution was not anything like the contribution of others. But but I think it was…I think it’s that thing of you don’t want to think that it’s going to happen. Part of it is just sort of denial. And then part of it was concern that it would do damage to the president’s political standing, and then do damage to the markets, which would do damage to his political standing. And so they took that minimal…move to shut down people from China coming into the country.
But I also…just don’t think that the president has any sort of understanding of the science involved. I mean, President George W. Bush read the pandemic book that John Barry wrote about the about the pandemic of 1918, and had understanding and context or what that meant, and so initiated a huge policy review and so on, so forth.
Obama also understood it intellectually, and made sure that public health kept up to date on it, and because they went through the SARS crisis, there was that. But I don’t think President Trump really understood it, really understood how important it was. And that was a failure of, you know, curiosity.
IU: A failure of curiosity?
JE: I think Fauci and the others did their best. But I don’t know, it was weird. He…wasn’t interested in the subject, which seems impossible.
IU: Was it just the China angle? I mean, was it that the worse it got, the worse he thought it would make China look, or that somehow not addressing it would [make China look worse]?
JE: No, I mean…the thing that was extraordinary about the China pivot, you know, ‘[It’s] China’s fault, China’s awful, terrible,’ is that that was not the public communication in January and February. [At that time, the prevailing view was that] Xi is doing a great job. I mean, defies belief what happened. You know, if they had taken it seriously, done ‘January-1-for-30 days’ and they really clamped down it, the situation would be better. It wouldn’t be much, much better. Because it’s such a big country and people fly in and out…but it would be so much better. And as you know, I’ve said this a hundred times. I think it was a failure of curiosity.
IU: So, to circle back to the election, I mean, we agree that President Trump and the Trump administration bungled this pandemic. It beggars belief what has happened this year. It was such a colossal failure. And yet many people voted for Trump anyway. In fact, a surprising number of voters, even in states…in the Midwest that are being completely blindsided and headed for worse, probably in terms of the spread of the pandemic. [They] voted for him anyway. To what do you attribute this? It seems like a cognitive dissonance at a very large scale, to say the least.
JE: I always I always thought Charles Murray, I guess they call him a sociologist or a social commentator or whatever. Quite a controversial one. But I think his line was that the 2016 election, the role Trump played was as ‘the murder weapon.’ Right. He was there essentially to ‘kill Washington.’ [There was] anger toward a system that a lot of people viewed as, ‘They’ll send you to war, but they won’t take care of you, they will allow private equity to strip mine your business and so on, so forth.’ I mean, there’s a whole range of anti-elitist…just a feeling that no one cares about them [Trump base voters]. And Trump made a big point of caring about them. And I think it was just a case of having committed one murder, there was the opportunity to commit another.
Another thing that I think was going on is that Biden represented not a step forward, which is the way a lot of people on the East Coast and West Coast perceive him, but as a step backwards for the middle part of the country. Just going back to the morass that we had tried to assassinate in 2016.
So there was that and then there was the cultural stuff and social disorder and all that…and then I think Trump was a fantastic showman. And the last week of the campaign, he campaigned, you know, really hard. And I think in the midst of economic recession and the pandemic and real concern about…sort of where the country is going, the choice between the old Osama bin Laden line [ed: a quote attributed to Osama bin Laden], kind of between a strong or weak horse, people will go with the strong horse. During the last week of the campaign, Trump was clearly the strong horse and Biden was a weak horse.
So I think that I think that helped Trump a lot. The other thing that helped Trump a lot is that had a fantastic turnout operation. So they I think they literally turned out ninety five percent of their voters, which is unprecedented.
IU: So in terms of what happens next…I guess you wouldn’t call it a Trump coalition, but maybe the Trump cohort or the critical mass of Trump supporters, which is what?
JE: The base.
IU: OK, so the Trump base moving moving forward. Trump’s out of the White House. The base obviously has got some kind of critical mass that can move the needle in terms of elections. What do you see coming next for them? How are they how do they continue to influence American politics at the state or the federal level ?
JE: They will decide who is the next Republican nominee for president in 2024. So that’s that’s kind of a big deal. Trump himself is not going to go away. I mean, everybody says he’s addicted to Twitter, but what he’s actually addicted to is TV…Twitter is a marketing tool to have people watch him on TV. So I think he’ll become a major force. I think he’ll replace Rush Limbaugh as the voice of the populist right.
And I think…there’s a significant part of Trump’s base that is in favor of much more active government intervention on their behalf. And the Sanders message resonates with that base. And I think some of it will, if the left is ascendant on the Democratic side, the Trump base has captured the Republican Party, but it may be diminished somewhat by the Democratic left if they sensibly walk in ‘Medicare For All’ over time to shore up Social Security, etc.
IU: So do you see a schism within the Republican Party? The classic line is that ‘Democrats fall in love and Republicans fall in line,’ and whoever the Republican nominee is, the party will support them. And yet, it seems there is cognitive dissonance in different parts of the electorate. Do you see that happening within the Republican Party? Can this party remain the the pro-business, small government party?
JE: I don’t think there is a Republican Party anymore. I think there’s a Trump populist party. Trump’s approval rating amongst Republicans was 95 percent or 90 percent, depending on which poll you look at. So he’s not just a dominant figure, he’s the totally dominant figure in the Republican Party. And if he endorses in 2024, I suspect that that person will be the nominee, whoever he endorses. So that the Republicans that you and I grew up with, you know, businesspeople and Wall Street people and so on, so forth, that group is three percent. That is just not influential in the party in terms of votes. And their money no longer matters. The most important development, it seems to me, in this campaign was small donor contributions to Trump, which were big. They added up to a lot of money. I think, 600 million dollars.
But the most astonishing fundraising operation was ActBlue, which is a liberal left Democratic organization that does online fundraising. In the third quarter, they raised 1.5 billion dollars—B-billion—dollars. That erases any big donor advantage that the Republicans have long benefited from. So, you know, if you’re part of the Trump Populist Party, you look at Wall Street saying, ‘here’s a hundred thousand (dollars) or here’s a million or whatever. It’s like, ‘We don’t need it. We don’t need you anymore.’ And that that’s on both sides. So Act Blue Democrats, you know, they can raise all the money they need on online. Same with the Republicans. That spells very bad news for private equity.
IU: You’ve mentioned that you think 2021 is going to bring a reckoning for private equity, or [a] backlash, let’s call it that. Talk a little bit about that.
JE: Well, I think I think if you’re Joe Biden, you’re obviously looking for revenue to get the deficit somewhat under control and you’re going to do a second wave of stimulus. So if you’re going to trade with the Republicans, you have to do some give and take. And…one of the easiest places to get consensus is to roll back the carried interest tax break and tax people who make 10 million dollars or more. And those two will not have much opposition on the on the Republican or the Democratic side. There will be opposition [among some Republicans], but Trump’s base will not oppose it.
So, I think that’s the first…or one of the first things that’s going to happen. Long term, because their money doesn’t matter anymore, then they’re (private equity firms in the U.S.) orphaned a little bit.
When this all started, when this private equity…craze began, it was about taking companies that were underperforming and fixing them and investing in them and getting them back on track and then taking them public. And eventually making money. That has become, you know, sort of a strip mining of company after company after company, most famously [bankrupt toy retailer] Toys R Us. Again and again and again, they’re littered on the road. And that’s cost a lot of people a lot of jobs. And [in] the Trump base—there is real hatred for private equity. A lot of people didn’t know what it was at first, but more and more of them are ‘getting’ what it’s [about]. So if you don’t have the support of the Sanders wing, and you don’t have support of the Trump base, you’re looking at 55 percent of the electorate. So I think they they really need to to figure out what their strategy is, because the reckoning is coming for them.
