00:00:00
Secretary Bessant, welcome back to
00:00:01
All-In. We appreciate you taking the
00:00:04
time to catch up with us and provide
00:00:06
this first year in review. We're excited
00:00:08
to have you here and hear how things are
00:00:11
going and what's ahead regarding the
00:00:13
fiscal condition of the US government,
00:00:16
the economic condition of the US
00:00:19
economy, including how things are going
00:00:20
for Wall Street and Main Street. And
00:00:22
finally, we'd like to broadly discuss
00:00:24
some of the administration's policies,
00:00:26
decisions, and how they're playing out
00:00:27
or will play out from your point of
00:00:29
view. I'll start us off and maybe to
00:00:32
catch up on our last conversation. One
00:00:35
of the things that I've cared deeply
00:00:36
about and which you shared an objective
00:00:38
around is getting the budget deficit
00:00:41
below 3% of GDP. I'd love to hear uh
00:00:45
from your point of view how that's going
00:00:48
and how things are looking for fiscal
00:00:50
year 26. the actions that have been
00:00:52
taken and what you think's ahead for
00:00:54
that target.
00:00:55
>> Good to be with you. Happy to review the
00:00:57
year, talk about next year. Uh there's a
00:01:00
lot going on. I would c categorize 2025.
00:01:03
We had some important victories, some
00:01:05
important policy announcements, uh some
00:01:08
important movement, but I as I've
00:01:10
described it, 2025 was setting the
00:01:13
table. And I especially on the economy,
00:01:16
I think the the feast and the banquet's
00:01:18
going to be in 2026.
00:01:20
To start with the budget deficit,
00:01:23
we didn't get much credit because it
00:01:25
came out during the shutdown. The the US
00:01:28
fiscal year is on September 30th. We had
00:01:32
a slight fiscal contraction for the
00:01:34
year. Wasn't much, but much better than
00:01:37
the 2.0 trillion that was estimated. We
00:01:41
came down from about 1.8 trillion to
00:01:44
1.78.
00:01:46
So, a a contraction nonetheless for the
00:01:50
calendar year. We're making great
00:01:52
progress. And just to put it in context,
00:01:54
Biden administration, they blew things
00:01:57
out try trying to get Vice President
00:02:00
Harris elected in the fourth quarter. So
00:02:03
last year 2024
00:02:05
40% of the government spending occurred
00:02:08
in the fourth quarter as they had the un
00:02:13
uh successful
00:02:15
or their unsuccessful attempt to
00:02:17
convince voters that they uh weren't in
00:02:20
a world of hurt. I forecast that we will
00:02:23
have approximately a 200 to 300 billion
00:02:26
fiscal contraction uh for the calendar
00:02:29
year which is between 7 1% of GDP. We're
00:02:35
going to end the year with nominal
00:02:37
growth close to 6%. So we will be
00:02:41
bringing down the deficit to GDP. I
00:02:45
believe it peaked 6.8% 8% for the
00:02:48
calendar year previous year and we're
00:02:51
going to be in the mid-5s. So, it's a
00:02:53
very good start on an important journey
00:02:56
and I've said that I would by the time
00:02:59
President Trump leaves office that we
00:03:01
would like to uh have something with a
00:03:03
three in front of it which will
00:03:05
stabilize the deficit to GDP which is
00:03:08
the important number and enable us to
00:03:10
start paying down debt.
00:03:13
Scott, it seems like the tariffs have
00:03:15
had an enormously positive impact. It's
00:03:18
given you a lot of tools in the toolbox
00:03:21
to work with. Why do you think so many
00:03:25
people got it wrong? A lot of people,
00:03:28
I'm sure, that you've known and worked
00:03:29
with in your prior life as a hedge fund
00:03:31
manager.
00:03:33
What did they get wrong? What did they
00:03:36
miss that you were able to see?
00:03:38
>> Well, I I a couple of things. I I think
00:03:40
people didn't have an open mind. Uh they
00:03:43
became the Trump tariffs which
00:03:45
immediately a large cohort. Uh whether
00:03:49
it was government officials, industry
00:03:50
people, the general population because
00:03:53
President Trump wanted to do it, it must
00:03:55
be bad. I I said the other day,
00:03:58
President Trump cured cancer but it
00:04:01
caused dandruff. Then people would say,
00:04:03
well, you know, President Trump has
00:04:04
caused a dandruff epidemic. And um look
00:04:09
that there's a lot of orthodoxy that
00:04:12
hasn't worked. If we look back
00:04:15
early early 2000s letting China into the
00:04:18
global trading system that they would
00:04:20
become more like us and there was a
00:04:23
point and I'm somewhat sympathetic to
00:04:26
the people who believe that but by 2013
00:04:29
when Xiinping came in and great writers
00:04:33
like Elizabeth economy who had been of
00:04:36
that view reversed and said he's a
00:04:38
different kind of cat. It's no longer
00:04:40
going to be Chinese policies with
00:04:43
capitalist tendencies. It's just going
00:04:45
to go back to, you know, hard communism,
00:04:48
Leninism. And I I just think that it was
00:04:54
a failure of imagination. I I've said
00:04:57
several times people and maybe we'll
00:04:59
talk about it today when people ask me,
00:05:01
"What are you looking for in a Fed
00:05:03
chair?" Said, "It's someone with an open
00:05:04
mind." If we go back to the 1990s, Alan
00:05:08
Greenspan did a magnificent job because
00:05:11
he had an open mind that the internet
00:05:15
office modernization boom was going to
00:05:19
create a productivity bonanza for the US
00:05:22
economy. And he let the economy he let
00:05:25
it rip. And we had an incredible economy
00:05:28
paid down a tremendous amount of debt
00:05:31
that by 1998 1999 with a combination of
00:05:38
Clinton administration having gotten
00:05:40
religion new Gingrich and his policies
00:05:44
there was talk the at the end of the 90s
00:05:47
that there might not be enough
00:05:49
government debt to you meet the needs of
00:05:52
the financial system which is the
00:05:54
opposite of what we have Now, so again,
00:05:57
I I would uh part of it was just
00:06:00
anything the president does must be
00:06:02
wrong. Part of it was a failure of
00:06:03
imagination. And you know, there there's
00:06:06
some very good studies coming out now
00:06:09
that are showing why why everyone has
00:06:11
been wrong that the the measurement
00:06:14
problems the on
00:06:17
the increase in goods prices. There's a
00:06:21
study from not a friend of the
00:06:23
administration, the San Francisco Fed
00:06:25
with 150 years of data, I would refer
00:06:28
everyone to that that shows that tariffs
00:06:31
do not cause inflation, that they're
00:06:33
actually disinflationary.
00:06:35
So, has anybody read that study? Scott,
00:06:39
has that been, I would say, a part of
00:06:41
the conversation
00:06:43
in the administration now that there's
00:06:45
this new revenue stream for the federal
00:06:47
government, there's an opportunity to
00:06:50
cut taxes and cut other sources of
00:06:52
revenue for the federal government and
00:06:54
that could potentially accelerate the
00:06:56
economy. But balancing that question
00:06:59
against the importance of cutting the
00:07:01
deficit, how do you think about the
00:07:04
balance between using tariffs as a
00:07:07
mechanism for reducing the tax burden on
00:07:09
the economy versus using the tariffs as
00:07:12
an incremental revenue source for the
00:07:14
federal government to start to reduce
00:07:15
the deficit and pay down the debt
00:07:17
eventually? David, before I answer that,
00:07:19
another thing I want to go back to is
00:07:21
President Trump and one one of the
00:07:23
reasons for the success of the tariff
00:07:25
policy or I I'll give you two reasons.
00:07:28
One is that President Trump has used
00:07:30
them for national security. So the
00:07:32
tariff policy has become part of
00:07:34
national security who's able to use the
00:07:36
tariffs to negotiate trade deals. when
00:07:39
he ratcheted up some of the tariff
00:07:42
levels to 35 49 50%
00:07:46
even 145 with the Chinese it brings
00:07:49
people to the table in uh the spring the
00:07:54
president put fentanyl tariffs on Mexico
00:07:59
they've all come to the table to help
00:08:02
and partner with the US government to
00:08:04
end this scourge on our people we're
00:08:06
seeing fentanyl deaths drop We because
00:08:09
of the the good efforts of China, we
00:08:13
made a good faith move and decreased
00:08:15
their fentanyl tariffs by half down to
00:08:18
10%. So that's been national security.
00:08:22
Same thing on October 8th when Beijing
00:08:25
announced that they were going to put a
00:08:27
worldwide export license on any any
00:08:32
product that had 01% of Chinese rare
00:08:35
earths in it, which would have ground
00:08:38
the Western trading system to a halt.
00:08:40
President Trump was able to threaten a
00:08:42
100% tariff and the Chinese immediately
00:08:45
came to the table. The the other thing
00:08:47
that I would say so so that's all
00:08:49
national security. The other thing that
00:08:52
I would say that people missed that I
00:08:54
was convinced of is that the Chinese
00:08:56
business model is based on volume. It's
00:08:59
based on employment. It's based on a
00:09:02
5-year plan. And I I think everyone
00:09:05
neglected the idea that despite the t
00:09:08
the tariffs, the Chinese were going to
00:09:10
keep producing that it it's one of these
00:09:13
they may lose a dollar on every product,
00:09:15
but they make up for it in volume. Can
00:09:17
we forecast these tariffs through 28 or
00:09:21
do you think that we have to have
00:09:23
moments where whether it's the Supreme
00:09:26
Court who's opining on one body of
00:09:29
language versus another may change your
00:09:31
course? But do you feel confident that
00:09:33
we can forecast these revenues now out
00:09:35
through the balance of President Trump's
00:09:38
term?
00:09:38
>> Well, I I think the I think the revenues
00:09:41
are are a combination of revenues. So
00:09:44
the the ultimate goal of tariffs the the
00:09:46
revenue collection I think but of in a
00:09:49
way is a payback for the imbalances that
00:09:53
have gone on over the years. But over
00:09:56
time the the real idea is to balance
00:09:58
trade and reshore manufacturing and
00:10:02
bring our economy into balance with our
00:10:04
trading partners. So what should happen
00:10:07
is over time tariff income will come
00:10:11
down and US tax receipts will come up
00:10:15
whether it's from factory jobs or more
00:10:18
manufacturing and through higher payroll
00:10:22
taxes. So you we will we will start off
00:10:25
at this very high level then we will
00:10:27
rebalance and come up. So I I I think
00:10:30
it's difficult to know the timing. We
00:10:33
know the direction. We know the
00:10:34
destination, but the the timing is
00:10:36
difficult on terrorists versus increased
00:10:40
domestic tax revenues. What what I can
00:10:42
say is when when I got into the
00:10:44
investment business in the 1980s, there
00:10:47
was always a focus the on trade and how
00:10:50
much were we making in the US and again
00:10:54
that everything made outside of the US
00:10:56
is a decrease in US GDP. So, as we bring
00:10:59
it back, I think we're going to start
00:11:01
looking more at the the content of trade
00:11:06
versus domestic manufacturing as a
00:11:09
component of GDP acceleration.
00:11:12
>> As we wrap tariffs,
00:11:14
we have a Supreme Court ruling coming in
00:11:17
January. What happens if that goes
00:11:19
against the administration?
00:11:21
>> Well, I I don't think it's against the
00:11:23
administration. And I actually think
00:11:24
it's against the American people and it
00:11:27
it will be again as I said it it will be
00:11:30
a hit to national security and the the
00:11:34
the revenues aren't the the focus here.
00:11:38
The revenues aren't the focus. The the
00:11:39
the revenues can be replaced but all all
00:11:42
the things that President Trump has been
00:11:44
able to do using tariffs on the national
00:11:47
security side will be will be
00:11:48
jeopardized.
00:11:50
>> Would you be able to just work with
00:11:52
Congress on them? seems to how the
00:11:54
constit see seems to be how the
00:11:55
constitution was designed is that the
00:11:57
congress would have this authority. So
00:11:58
why not just work with them? Is that the
00:12:00
fallback plan?
00:12:01
>> What why would you say congress would
00:12:03
have what authority?
00:12:06
>> Well the constitution has tariff
00:12:08
control. So that's at least my
00:12:11
understanding of the US constitution and
00:12:13
I think that's why there's a supreme
00:12:14
court case. Correct. Uh well the we
00:12:17
we'll see uh the the president has has
00:12:20
the right under AIPA the for licenses
00:12:24
we've also seen um it it was I I was at
00:12:29
the Supreme Court and for for your
00:12:31
viewers a bucket list event should be
00:12:35
going to see a Supreme Court hearing. It
00:12:37
it it it is in terms of any institution
00:12:42
that is the closest to what our framers
00:12:44
designed and kind of jumped into
00:12:47
business in 1789. It is probably it is
00:12:51
surely the closest to what you would
00:12:54
have seen at the court. They're very
00:12:56
convivial with each other.
00:12:58
>> Yeah. I listen to it. It's quite
00:12:59
compelling content. Yeah.
00:13:00
>> Yeah. It's it's and to to be there in
00:13:02
person uh not not my political leanings
00:13:06
but ju justice Kagan the was just an
00:13:10
intellect of towering uh impressiveness.
00:13:14
I came away thinking I am glad that
00:13:16
Justice Alto is not my father because he
00:13:20
he he he
00:13:22
is smart. He is bombastic and when when
00:13:27
he he got the knife into a couple of the
00:13:30
plaintiffs in a line of questioning and
00:13:33
he uh move moves it around quite a bit.
00:13:36
So, um, but one one line of questioning
00:13:40
in in this that one one of the
00:13:43
plaintiffs agreed on was so and it was
00:13:46
either from Justice Alita or Justice
00:13:48
Kavanagh was you were telling this court
00:13:51
that the president of the United States
00:13:53
can do 100% embargo but he cannot put on
00:13:56
a 1% tariff and the plaintiff said yes.
00:13:59
>> Yeah. And that ruling is coming out in a
00:14:01
few months. It's
00:14:02
>> January or February expectation. Yeah.
00:14:04
>> January, February. And Jason, to your
00:14:06
question, u I I I don't know what the
00:14:11
ruling is going to be. My my guess is
00:14:14
everyone, you know, I I think that
00:14:16
framing is very important in any issue.
00:14:20
And I think the framing thus far has
00:14:22
been very poor because it's viewed as
00:14:24
01. It's up down. And I my guess is it
00:14:29
will be more nuanced. having been in the
00:14:31
room for instance I I think uh many in
00:14:34
the media were at a different hearing
00:14:36
than I was at. So when Justice uh
00:14:40
Barrett Comey Barrett said if we undo
00:14:44
this it'll be a mess that was viewed as
00:14:47
just it will be a mess as opposed to
00:14:52
I believe she was actually leaning
00:14:54
toward looking for a reason not to undo
00:14:57
it because it would the refund she was
00:14:59
referring to the refunds the president
00:15:01
has absolute ability or the executive
00:15:04
branch has absolute ability through
00:15:06
301's 230 32s and something called 122s
00:15:10
to raise revenue on trade. So
00:15:15
using the IEPA is not a stretch of that
00:15:18
authority.
00:15:20
>> Okay. So I I think the question and I
00:15:24
really appreciate the introspection here
00:15:26
on year one and the optimism for year
00:15:28
two. Wall Street, the tech industry,
00:15:30
we've absolutely loved the results in
00:15:32
year one. My portfolio has surged. So
00:15:34
that's fantastic. Thank you. probably
00:15:36
beyond my expectation, but Main Street
00:15:38
is particularly displeased with the
00:15:40
Trump administration's first year. Your
00:15:43
net approval rating is the lowest on two
00:15:45
key issues. Inflation net approval
00:15:47
rating down about 30% uh on average
00:15:50
since the summer and on the economy 18%
00:15:53
net negative. And so this is quite
00:15:56
paradoxical obviously since Trump was
00:15:58
elected and considered historically very
00:16:01
strong on those two specific issues. So
00:16:04
my question to you is, are the American
00:16:06
people wrong? Or maybe did President
00:16:09
Trump set expectations too high during
00:16:11
the election or do you just need more
00:16:13
time to execute and you're asking the
00:16:15
American people humbly to give you more
00:16:17
time?
00:16:18
>> Well, I I I think it's C because as Vice
00:16:22
President Vance has said, we didn't get
00:16:24
here overnight. We inherited a mess. And
00:16:27
I think 2026 is going to be a a very
00:16:30
good year for the American people for
00:16:33
Main Street. And what we are not going
00:16:36
to do is a which is what the Biden
00:16:39
administration did and many commentators
00:16:42
whether it was Greg in the Wall Street
00:16:44
Journal, the toxic Paul Krugman who I
00:16:47
seems to have been booted from the New
00:16:48
York Times and is relegated to Substack
00:16:50
or the former vice chair of the Fed uh
00:16:53
Alan Blinder. And they said, "Oh, no.
00:16:56
You don't understand how good you have
00:16:57
it. You know, eat eat your drink your
00:17:00
grog, have your bread, peasants. Um, we
00:17:03
we'll give you a little more that you
00:17:07
It's a vibe session. And we're going to
00:17:10
explain to you why you have it really
00:17:11
good. We understand that the American
00:17:14
people are hurting. And I think the way
00:17:17
to think about it is there's a price
00:17:18
level that things appreciated to during
00:17:23
the Biden administration. And then there
00:17:24
is the inflation level. The price level
00:17:27
has gotten very high. Uh I think
00:17:30
cumulative CPI during the Biden
00:17:32
administration was 21 22%. There's a
00:17:36
Wall Street firm called Strategus
00:17:37
Research. They do something called the
00:17:39
common man index and it it is what do
00:17:42
working families need? gasoline
00:17:45
insurance, the uh autos, mostly used
00:17:48
cars, rent,
00:17:51
staples, and that appreciated by about
00:17:55
35%. So, people are seething over the
00:17:58
high price level. And you as we saw in
00:18:01
the inflation print this week, inflation
00:18:04
is starting to turn down. And affordabil
00:18:08
affordability is two parts. It is
00:18:12
getting the price is under control. Some
00:18:16
things we can decrease. Gasoline is
00:18:19
coming down substantially. I would
00:18:21
expect that it would come down much
00:18:23
more. Oil. Oil is down substantially.
00:18:26
Gasoline follows it with a lag. Uh rents
00:18:29
are down and we are now seeing uh the
00:18:32
effects of what 10 to 20 million
00:18:35
undocumented people coming into the
00:18:37
country did for rents. that this mass
00:18:40
unfettered immigration for D and C rent
00:18:43
levels was through the roof. There
00:18:45
there's a study from Wharton that shows
00:18:47
that one 1% of population increase in in
00:18:52
a city leads to 1% rent. So, you know,
00:18:55
we can see why rent went up that if the
00:18:58
migrants are going home, we are now
00:19:00
seeing rents are down about 5%. I think
00:19:03
that trend will continue. Again, the
00:19:06
inflation numbers are starting to roll
00:19:08
down. I think that they will. And then
00:19:10
the other side is real incomes, which I
00:19:13
think are starting to accelerate. Real
00:19:16
incomes are about up about 1.8% since
00:19:19
President Trump took office. And that's
00:19:21
back to the Main Street question.
00:19:23
>> So, just one quick followup there and
00:19:25
I'll give it back to my compatriots.
00:19:28
We need more time. This is not a
00:19:30
one-year project. It's going to take two
00:19:31
or three years and we're not going to
00:19:33
gaslight you and the numbers are looking
00:19:35
good. On that note, we had the shutdown
00:19:38
October numbers were not complete.
00:19:41
There's a bunch of reports now uh and
00:19:43
hand ringing over those numbers. I think
00:19:44
maybe you could address it, which is the
00:19:46
BLS filled in a lot of the non-servey
00:19:50
data sources with some zeros. Uh and
00:19:54
potentially the criticism now or the
00:19:56
concern on Wall Street and from analysts
00:19:59
is that maybe this 2.7 number is over
00:20:02
optimistic. maybe you could address
00:20:05
people's concerns and can we trust you
00:20:06
with the numbers I think is what Wall
00:20:08
Street saying.
00:20:09
>> Uh well, you know, again, it it's
00:20:12
amazing when a good number comes out,
00:20:14
then it switches to that. And Jason,
00:20:17
just let me tell you, every every Wall
00:20:20
Street predictor on Bloomberg was wrong.
00:20:23
So, what do you do when you're wrong?
00:20:25
You blame the measurement. You blame the
00:20:27
the data. And there there's always a lot
00:20:30
of imputed data the in any of these
00:20:32
numbers. That's why we get revisions.
00:20:34
And I I'm looking at I was looking at
00:20:37
the numbers and paradoxically the two
00:20:40
things that I think are coming down the
00:20:42
fastest which are rent uh also it's
00:20:46
known as the owner owner occupied uh
00:20:50
funding or owner occupied rent. Uh that
00:20:53
was actually up on the month. I believe
00:20:56
it is uh turned negative. And then the
00:20:59
other thing that was up was energy and
00:21:01
gasoline which we can is an observable
00:21:04
event that those prices have decreased
00:21:07
substantially uh from September October.
00:21:11
So I I actually think it was a a pretty
00:21:14
uh accurate number.
00:21:15
>> So you've checked into that the BLS
00:21:17
numbers from October. You feel confident
00:21:19
they they put those placeholders. They
00:21:21
put those assumptions in correctly. You
00:21:23
feel confident in that? Look, the the
00:21:26
the BLS is problematic. We we've seen
00:21:28
that the whole time. I have no reason to
00:21:31
believe that this is any less robust
00:21:33
than any other data series. And I I
00:21:35
would say with with rent, with uh energy
00:21:40
that those are very large components
00:21:43
that have turned down substantially that
00:21:45
actually recorded a gain for that
00:21:47
measurement period. Just to build on
00:21:49
that, we had people on our team go and
00:21:52
run our own analysis
00:21:55
both using interpolation and other data
00:21:57
points and we get to exactly Scott's
00:21:59
numbers and frankly on on the margin
00:22:01
sometimes slightly better. So I think
00:22:03
the trend is very much what you and
00:22:07
Kevin Hasset have been talking about in
00:22:08
the last couple days. And gentlemen, I
00:22:10
would also point you to Fed Governor
00:22:13
Steven Myron, who came came from CEA,
00:22:16
he'll be going back to CA probably in
00:22:19
February or March, delivered a very
00:22:21
robust uh speech at Colombia. It was
00:22:24
either a week or two ago and he made
00:22:27
some very interesting measurement points
00:22:30
on inflation. So one one piece of the
00:22:34
inflation component there is financial
00:22:36
services and that goes up based on
00:22:39
whether the stock market's up.
00:22:41
>> That's right.
00:22:42
>> When in fact portfolio management costs
00:22:44
have come down that it is showing an
00:22:47
increase in cost. So that back to
00:22:50
Jason's question on BL BLS uh how how
00:22:54
robust are the numbers? I I think there
00:22:56
are a lot of changes that could be
00:22:58
adjusted to give us a better picture.
00:23:00
Let's stay on the affordability topic
00:23:03
and I would like to go to this essay you
00:23:05
wrote which is uh incredible the Fed's
00:23:07
new gain of function monetary policy
00:23:10
which you wrote in the international
00:23:11
economy. We'll link to this article. A
00:23:14
lot of it goes to how the Fed in many
00:23:17
ways has exacerbated the sense of
00:23:19
inequality and the actual factual
00:23:21
inequality. But before I ask you that
00:23:23
narrow question, Scott, can you help our
00:23:26
viewers just take a step back and give
00:23:28
us a little bit of historical context on
00:23:31
the Fed itself? So, we had a central
00:23:34
bank in the 1700s, in the 1800s. Andrew
00:23:37
Jackson got rid of it. It came back in
00:23:39
the early 1900s.
00:23:41
when we established it then
00:23:44
versus what it's doing today and you've
00:23:47
studied this carefully. Can you help us
00:23:49
understand and contrast and compare how
00:23:51
it started versus how it's going?
00:23:54
>> Sure. So, Fed was created in 1913 as a
00:23:57
response to the panic of 1907 which
00:24:00
people most people don't know about. It
00:24:02
made the crash of 29 look like a day at
00:24:04
the beach.
00:24:05
>> Nickerbacher crisis. Yeah,
00:24:06
>> the necrobacher crisis and just the a
00:24:10
domino effect within the financial
00:24:11
system there there was no central bank.
00:24:16
Bank of England is a very old central
00:24:18
bank and had been functioning well. uh
00:24:21
JP Morgan actually had to personally
00:24:24
step in uh in in the crisis and it it
00:24:28
was deemed that there should be a
00:24:29
mechanism for the the government to be
00:24:31
able to uh either wind down, provide
00:24:34
liquidity and have have a greater
00:24:36
control in the economy rather than priv
00:24:39
private operators. For much of its
00:24:42
history, uh Treasury uh had a seat at
00:24:45
the table on the Federal Reserve. Post
00:24:47
World War II that stopped. And then if
00:24:51
we look at more recent history, what
00:24:53
happened after the great financial
00:24:55
crisis? We saw this paralysis in the
00:24:58
economy. I think a huge part of it which
00:25:00
has been part of my regulatory agenda
00:25:03
here at Treasury this year through the
00:25:05
financial stability oversight council is
00:25:08
undoing these the poorly thoughtout
00:25:12
crisis
00:25:13
crisis legislation.
00:25:16
But what the crisis legislation did and
00:25:18
look after financial I I've studied and
00:25:21
taught at Yale the history of financial
00:25:22
crisis there's always retribution and
00:25:26
you you go from a lack regulatory regime
00:25:29
to an over constricted regulatory
00:25:31
regime. So coming out of the traumatic
00:25:35
GFC for for 10 years we had this over
00:25:40
constricted regulatory regime where the
00:25:42
Fed was deemed to be the only game in
00:25:44
town. So you know imagine
00:25:48
one one example would be a a home in
00:25:52
North Florida that sold for $500,000 in
00:25:55
2006. All of a sudden people are handing
00:25:58
the keys back. It is now $150,000.
00:26:02
Great buy, great affordability, but
00:26:04
because of the new financial regulation
00:26:06
and the incentives that the the banks
00:26:09
were in some cases rightly taken to the
00:26:11
woodshed for bad behavior, but there was
00:26:14
no incentive to give credit at the
00:26:16
bottom. So what happened the asset
00:26:20
owners, people with money were able to
00:26:22
accumulate assets. We saw very poor
00:26:25
growth during the period during the
00:26:27
Obama administration and the the Fed cap
00:26:31
kept rates low for very long. But what
00:26:34
the Fed engaged in starting I believe
00:26:36
was October 6 o excuse me March 6 or
00:26:40
March 8th uh 2009 was the Fed began
00:26:44
began what we call QE or largecale asset
00:26:48
purchases. They went went in the market
00:26:50
started buying long bonds and the theory
00:26:53
of the case there is you create
00:26:55
liquidity you take safe assets out of
00:26:58
the market uh long duration safe assets
00:27:01
and then the people who receive that
00:27:04
money uh would buy uh more risky assets.
00:27:09
Ben Bernani famously said when he was
00:27:12
asked what's the purpose of QE he told
00:27:14
everyone go buy equities. Well not
00:27:16
everyone could buy equities. So, we we
00:27:19
ended up with like this this two-tier
00:27:22
economy where either you were an asset
00:27:25
holder or you weren't and that the Fed
00:27:30
constant probably kept or definitely
00:27:32
kept QE going for too long. And you
00:27:35
know, I I called the Fed the engine of
00:27:37
inequality. And someone said to me,
00:27:39
well, do you believe that the Fed is
00:27:42
responsible for economic equality in the
00:27:45
system? And I said, absolutely not. that
00:27:47
is not one of their mandates, but they
00:27:49
shouldn't be exacerbating it and they
00:27:52
were the the leading cause of it. There
00:27:55
there's a fantastic book by a I I know
00:27:59
Karen Pedaru very well. Uh she's center
00:28:03
left to maybe hard.
00:28:04
>> Yeah. Not not your politics for sure.
00:28:07
>> Not my politics, but her book, The Fed,
00:28:08
the Engine,
00:28:09
>> her book is excellent. Yeah.
00:28:11
>> Engine of inequality. So we just kept
00:28:13
pushing up these asset prices and then
00:28:16
then we got co and uh markets became
00:28:21
disorderly and the Fed did exactly what
00:28:23
it should do. It came in, it stabilized
00:28:25
the market, but for some reason they
00:28:28
decided that they needed to continue
00:28:31
this QE right up until the 20 I think
00:28:36
February March of 2023
00:28:39
and they were in essence financing this
00:28:42
massive debt increase 7 trillion that we
00:28:45
that we saw during that period. So, as a
00:28:48
long way of saying the central bank has
00:28:51
become much more involved in the
00:28:52
economy. I think a lot of people don't
00:28:55
understand we've gone from what used to
00:28:57
be fairly straightforward rate setting
00:29:00
mechanism to now we have kind of this
00:29:04
three-headed beast at the Fed or this
00:29:06
very complex calculus that I don't think
00:29:08
anyone really understands myself
00:29:11
included. uh you have rate setting
00:29:15
policy, you have uh balance sheet
00:29:18
policy. So the Fed has a very big
00:29:19
balance sheet now. And then you have
00:29:22
regulatory.
00:29:23
>> Well, there's a part of your article
00:29:24
which was stunning to me where you
00:29:26
describe how the budget of the Fed works
00:29:29
and effectively when you understand that
00:29:32
there's a part of the Fed which acts
00:29:33
like a hedge fund and effectively is
00:29:36
taking risk and the revenues that they
00:29:38
generate are used to subsidize their
00:29:41
operations. Can you explain that for
00:29:42
folks cuz I I didn't fully realize that
00:29:44
that was happening.
00:29:45
>> Yeah. Well, well, again, the that the
00:29:48
Fed should make money. Fed typically you
00:29:51
used to make money and would remit money
00:29:54
back to the Treasury. And back to to
00:29:57
David's question of the budget deficit,
00:29:59
the the Fed was sending back about 3% of
00:30:02
GDP through
00:30:05
we have senior which is the float on the
00:30:08
currency. uh there are other operations
00:30:11
but then they started QE and no one told
00:30:14
the Fed that you know you're not
00:30:16
supposed to buy high so
00:30:19
they they they paid a high high price
00:30:21
for bonds low interest rates and they're
00:30:25
arbitrage the Fed's losing about hundred
00:30:27
billion dollars a year now
00:30:29
>> if you look at one of the key drivers of
00:30:34
Main Street's satisfaction with their
00:30:36
economic standing it's the price of
00:30:39
debt, the ability for them to buy a
00:30:41
home, to buy a car, to extend their
00:30:43
lives, and we've got the 10-year
00:30:46
Treasury sitting, I think, 42 to 46
00:30:48
right now in terms of the rate. And I
00:30:51
guess this may be a question that brings
00:30:53
in two other issues, the fiscal issue
00:30:55
and the economic issue. Is that a
00:30:57
reflection of the state of the fiscal
00:31:00
affairs of the federal government, the
00:31:02
state of the economy, both or the state
00:31:05
of markets selling off bonds? And
00:31:07
doesn't the Fed have an important role
00:31:09
to play in bringing those rates down and
00:31:11
making rates accessible for Main Street?
00:31:14
>> Well, I I think what the the Fed did,
00:31:16
unfortunately, they took modern monetary
00:31:19
theory from I say they went from MMT,
00:31:22
modern monetary theory to MMP, modern
00:31:24
monetary practice. So that the the the
00:31:28
Biden administration issued all this
00:31:30
debt and the Fed the Fed bought it. And
00:31:33
there there's a very good study from MIT
00:31:36
that's come out that shows uh you know
00:31:38
in a way that only PhDs at MIT can be
00:31:42
very precise. 42% of the great inflation
00:31:45
was caused by the budget deficit.
00:31:47
Another 17% was caused by the increase
00:31:50
in inflation expectations which I think
00:31:52
you could tie back to that. So you've
00:31:54
got almost 60% David that was caused by
00:31:56
the spending of the inflation. And I
00:32:00
think what again to go back to my
00:32:03
earlier point, I think what we're not
00:32:04
getting credit for here is that if we
00:32:07
can stabilize the budget deficit, even
00:32:10
bring it down, that that will contribute
00:32:13
to disinflation. If I think about
00:32:16
central bank credibility, no in my
00:32:19
career, probably post World War II, no
00:32:22
central bank had more credibility than
00:32:24
the Bundus Bank uh up until the advent
00:32:27
of the euro. But they controlled the ger
00:32:30
they worked with the German government
00:32:33
and they would work with each other hand
00:32:35
in hand. The Bundus bank would say if
00:32:39
you give us the fiscal control if you
00:32:42
give us if you are not prolificate if
00:32:45
you give us the reasonable fiscal
00:32:47
balance we will work with you we will
00:32:50
foam the runway to allow you to decrease
00:32:53
spending. We will decrease interest
00:32:55
rates. And I I I think that's something
00:32:58
we could be doing here. I
00:33:00
>> I'm I'm glad that you too are confused
00:33:02
by the Fed's actions, Secretary Besson,
00:33:05
because I read your article and while I
00:33:08
understand the mandate to get to 2%
00:33:10
inflation, why it's 2%, not three. I'm
00:33:12
I'm curious about your take on that
00:33:14
because I did a little historical uh
00:33:16
archaeology. I understand somebody in
00:33:18
New Zealand came up with the two target
00:33:19
as opposed to 2.5 or 1.5 or three. Let's
00:33:22
put that aside for a second. The thing
00:33:25
that I think most Americans don't
00:33:26
understand and the and the second
00:33:28
mandate, full employment, robust
00:33:29
employment, that seems pretty easy to
00:33:31
understand for all of us. But this
00:33:33
qualit qualitative easing and and how
00:33:36
they purchase and which assets they
00:33:38
purchase and why seems to have a
00:33:40
massively distorting effect on the
00:33:42
economy, at least according to your
00:33:43
essay and and some of the other sources
00:33:46
you cite in this essay, which we have in
00:33:48
the notes uh for people to read. What
00:33:50
should we be doing this qualifi this QE
00:33:53
at all? If you had your brothers and you
00:33:56
could just, you know, swipe a pen here
00:33:58
and and clean this up, would you just
00:34:00
get rid of the QE portion of what
00:34:02
they're doing? And how do they pick?
00:34:03
Like, how do you pick whose corporate
00:34:06
debt you buy? You know, are you buying
00:34:08
Nvidas and Ubers and Google's because
00:34:11
those are great companies or Microsofts
00:34:13
or are you buying, you know, Fords or
00:34:15
struggling companies or struggling
00:34:17
airlines? How are those decisions made?
00:34:19
and and should the American people be
00:34:21
buying those things and why?
00:34:23
>> Yeah. So, there's a lot to unpack there,
00:34:27
uh, that absolutely large-scale asset
00:34:31
purchases should be part of the
00:34:33
so-called central bank toolkit. But I I
00:34:36
think if we go back and look at CO,
00:34:39
which was a real test, the the Bank of
00:34:42
England had the best model. The markets
00:34:44
became unhinged. They stepped in for a
00:34:47
period I can't remember whether it was
00:34:49
30, 60 or 90 days. They stabilized
00:34:52
markets and you they they were the buyer
00:34:55
of last resort which is classic theory
00:34:58
for what a central bank's supposed to
00:34:59
do. They're supposed to provide
00:35:02
liquidity. They're supposed to open a
00:35:04
window where financial institutions can
00:35:07
pledge collateral and do it that way.
00:35:11
Um, and you know, I'll just point out
00:35:13
that when the bond yields were quite
00:35:16
high, the Fed did buy quite a bit. Uh,
00:35:19
and they would actually have a large
00:35:21
profit if they stopped during during
00:35:24
that period. Instead, they continued on
00:35:26
when we were the near near the the zero
00:35:30
bound. And what what we've ended up with
00:35:33
here is they pushed the asset price up.
00:35:36
The interest rates were low. Many people
00:35:39
couldn't buy a house during COVID, but
00:35:41
now the interest rate has normalized.
00:35:43
And you know, we're just in a much more
00:35:45
normal period for interest rates, but
00:35:49
we're not in a normal period for asset
00:35:51
prices because so many people still have
00:35:53
the 3% mortgages from co and back back
00:35:57
to your question on what should the Fed
00:36:00
buy traditionally
00:36:02
that the Fed since large scale asset
00:36:05
purchases began in 2009, they just
00:36:08
bought government bonds. They they
00:36:10
choose the duration. uh they switched uh
00:36:13
during COVID because look there there
00:36:17
were estimates we were going to have a
00:36:19
20 30 40% GDP decrease. Um so they they
00:36:26
were buying indices of high yield bonds
00:36:29
of of corporate bonds to stabilize the
00:36:33
market. I think what you're alluding to
00:36:35
Jason is also during that period in
00:36:38
conjunction with Treasury uh there were
00:36:41
bailouts and that's done by a facility
00:36:44
that is negotiated between the Fed and
00:36:47
the Treasury called a 133 facility and
00:36:50
you identify strategic industries that
00:36:53
may be struggling. It it would not have
00:36:56
behooved anyone for the airline industry
00:36:59
to go belly up because of a a virus that
00:37:04
turned out to be quite transitory. So,
00:37:07
you know, again, I I think these are
00:37:10
emergency powers. I think they should
00:37:12
have them in an emergency, but I think
00:37:15
the duration
00:37:18
went on much much too long. If you're
00:37:20
now in the bond sales game, Secretary
00:37:23
Bessent, I mean, you you've been on the
00:37:25
other side of the market, but now you're
00:37:26
selling the bonds. What do you see in
00:37:28
terms of appetite for US bonds? Has
00:37:31
China disappeared? Are they still
00:37:33
selling down? Are there other buyers
00:37:35
emerging? And how does broader capital
00:37:38
markets look to US debt in this moment?
00:37:42
Well, it's it's like the John Maynard
00:37:44
Kaine said said a lot lot of economics
00:37:49
is is a beauty pageant. You're just
00:37:51
picking like who do you think's going to
00:37:53
win? And that that the U the US became
00:37:58
the the worldwide winner last year. We
00:38:01
had the best performing bond market,
00:38:03
best performing market since 2020. And I
00:38:06
I think that was for a combination of
00:38:08
reasons. One was the fiscal progress we
00:38:11
made and everyone went from the tariffs.
00:38:17
They were a doomsday machine to hm maybe
00:38:20
tariffs are taking us to the promised
00:38:22
land in terms of fiscal payown. And uh I
00:38:29
I also think inflation expectations have
00:38:32
remained well anchored. Back to Jason's
00:38:34
question, why 2%? We've chosen 2%. And
00:38:40
I I I think it it's very difficult to do
00:38:44
a midair refueling or to call an audible
00:38:47
on two when you're above two because
00:38:50
then it looks like when you're above a
00:38:52
level, you will always fudge upward. So
00:38:56
I I think there is a very robust
00:38:58
conversation to get back once we are
00:39:02
back to two which I I think will be in
00:39:05
sight then we can have a discussion is
00:39:08
it much smarter to have a range like
00:39:10
what what drives me crazy the the
00:39:13
economy the markets are biology they're
00:39:16
not math they're not physics they're
00:39:19
they're nonlinearities
00:39:21
they're very complex systems they're
00:39:24
mutations in the system and this idea
00:39:26
that we can have this decimal point
00:39:29
certainty is just absurd. So I I believe
00:39:34
that once we re anchor to the target
00:39:39
then we could talk about a range and we
00:39:42
could decide whether the range is from
00:39:45
2.5 to 1.5 is it from 1 to three but I I
00:39:50
think it's very difficult to uh reanchor
00:39:54
until you meet the target and maintain
00:39:56
credibility. Maybe as we wrap up on the
00:39:59
Fed, can you give us a sense of the
00:40:01
candidates that are being interviewed
00:40:03
right now by President Trump, Kevin
00:40:05
Wish, Kevin Hasset,
00:40:07
>> Waller,
00:40:07
>> Chris Waller, and Rick?
00:40:08
>> Chris Waller, Rick Reed. How do you
00:40:10
think each of those will try to reshape
00:40:13
the Fed more in this constrained mode
00:40:16
that you're advocating for? Well, I I I
00:40:19
think many many of them have already
00:40:21
come out and said that they uh do want
00:40:24
to shrink it both as the footprint of
00:40:27
the institution in the economy but
00:40:29
shrink the institution itself that the
00:40:32
the Fed does not as we talked about
00:40:34
earlier the the Fed does not rely on
00:40:36
appropriations. The Fed just prints its
00:40:38
own money and it's has its own budget
00:40:41
and as I talked about in the article it
00:40:44
has its own police force. has its own,
00:40:46
you know, we've seen the big cost
00:40:47
overruns at the building uh here in DC.
00:40:51
If like if Treasury the we're looking at
00:40:56
new buildings for the the men of the
00:40:59
Bureau of Engraving, if we had that kind
00:41:01
of cost overrun, I can guarantee you
00:41:04
that I would be up in Capitol Hill
00:41:06
getting a the welldeserved earful.
00:41:10
>> Yeah. You'd be pillared. Yeah.
00:41:12
So, um,
00:41:15
but e each one of them
00:41:18
has talked about
00:41:20
moving back toward the more traditional
00:41:22
Fed role, moving into the just getting
00:41:25
the Fed back into the background. You
00:41:27
know, it it it wasn't meant that the
00:41:31
market and the economy and the American
00:41:33
people were supposed to hinge on every
00:41:35
word. It was supposed to be a
00:41:37
predictable process. You know, I I think
00:41:40
many many of them have talked about
00:41:41
getting rid of this so-called dotpot,
00:41:43
the summary of economic projections. Uh
00:41:46
they they've talked about what should we
00:41:48
do uh with the regional banks. No one no
00:41:52
one's talking about getting rid of them
00:41:53
or the regional bank presidents, but
00:41:55
should each one of the regional banks
00:41:58
have a specialty, go back to a center of
00:42:00
excellence? Why do we have so many
00:42:02
overlapping functions? Uh, you know, I I
00:42:05
can tell you for for me as someone who's
00:42:08
an economic historian, the interview
00:42:10
process has been fantastic because I I
00:42:13
got to interview 11 of the most
00:42:16
knowledgeable people on economics, the
00:42:18
Fed, monetary policy. One time I got to
00:42:22
interview five another time and I'll be
00:42:26
with four of them with the president.
00:42:28
So, you know, I I think I understand
00:42:31
probably better than just about anybody
00:42:33
in the country what needs to be done and
00:42:36
everyone wants to see a de a smaller
00:42:40
footprint and more predictability from
00:42:43
what's going on.
00:42:44
>> So, what happens in 2026 for Main
00:42:47
Street? What can you promise them? What
00:42:51
can you not promise them? What is out of
00:42:53
your control? because we talk a lot
00:42:55
about hey the speed limit and mortgage
00:42:58
rates but you can't in your position
00:43:01
correct me if I'm wrong have a dramatic
00:43:03
impact on the supply of homes as one
00:43:05
example so and so whatever you put the
00:43:08
rates at it could just drive the prices
00:43:10
of those homes up if we lower rates too
00:43:12
quickly and then we have another
00:43:13
situation like the great financial
00:43:14
crisis where people are over bidding uh
00:43:17
the the the remaining housing stock so
00:43:20
what can you actually promise to the
00:43:22
American people will happen in 2026 on
00:43:24
Main Street. We know Wall Street's going
00:43:25
to be fine and and these American
00:43:28
entrepreneurs and these companies are
00:43:29
firing on all cylinders. Fantastic. Lots
00:43:32
of regulations taken out of the way, but
00:43:34
what what can Main Street expect from
00:43:36
the administration in 2026?
00:43:39
>> Jason, two two things is one there
00:43:41
there's nothing I can promise because
00:43:43
that there's always a degree of
00:43:45
uncertainty. Uh but one one of the
00:43:48
things that we've been doing here at
00:43:50
Treasury when we talk about loosening
00:43:52
the financial regulations
00:43:55
that the
00:43:58
companies that suffered the most under
00:44:00
these regulations were the small banks.
00:44:02
So we have seen small and community
00:44:05
banks disappear at an alarming rate.
00:44:09
About half of them have disappeared
00:44:11
since the GFC. So I what I can promise
00:44:15
is that the regulatory regime for those
00:44:18
banks is being loosened and is the the
00:44:22
saying that there's three eight banks in
00:44:26
the US that are too big to fail that the
00:44:29
policies since the GFC were too small to
00:44:32
succeed and we are doing everything to
00:44:36
unleash the lending capability of these
00:44:40
banks the pro their profit profitability
00:44:42
will enable them to be part of their
00:44:44
communities to lend more.
00:44:47
70% I think I do the statistics 70% of a
00:44:52
lending 30 40% of real estate lending
00:44:55
40% of small business lending are from
00:44:58
these main street lenders. So I can tell
00:45:00
you there's going to be a bigger
00:45:02
availability of credit. I can tell you
00:45:05
that we are not going to blow out the
00:45:07
budget deficit and cause you you will
00:45:11
not see an MIT study that says that the
00:45:14
Trump 2.0 caused inflation through the
00:45:18
budget deficit. And I I can also tell
00:45:21
you that we are working to increase
00:45:25
working wages. In President Trump's
00:45:27
first term, hourly workers did better
00:45:29
than supervisory workers. bottom 50% of
00:45:32
households had a better increase in net
00:45:34
bigger increase in net worth than the
00:45:36
top 10%. So you know we we are trying to
00:45:40
level the playing field. Secretary
00:45:43
Bessent, this is a I I would say
00:45:46
conservative administration. And if you
00:45:48
look at the kind of economic
00:45:52
policy of of traditional conservative
00:45:54
administrations, you would not assume
00:45:56
that the administration would lead the
00:45:59
federal government to make large
00:46:00
investments in the private industry or
00:46:03
to participate meaningfully in the
00:46:06
economy. As we are seeing with some of
00:46:08
the deals that have been done over the
00:46:10
last couple of months where the the
00:46:12
administration has taken equity stakes
00:46:14
in key industries and key businesses and
00:46:18
also has concurrently provided either
00:46:20
regulatory unlock or or some sort of
00:46:22
trade participation. Can you just
00:46:25
comment on what some people are calling
00:46:27
state capitalism? Is this from your view
00:46:31
a a set of strategic interests or is
00:46:33
this a permanent shift in how the the
00:46:37
government plays a role in the economy
00:46:38
and and and how does that make sense
00:46:40
from a free market perspective? David, I
00:46:42
think it goes back to the idea that free
00:46:45
pure unfettered free trade was not fair
00:46:48
trade. when when you have competitors
00:46:51
whether they're chi China, Vietnam, some
00:46:54
others uh sometimes in in Europe that
00:46:58
have high subsidies then like this idea
00:47:02
that perfect ricardian equivalents exist
00:47:05
doesn't and we can see by these
00:47:08
distortions that developed the these
00:47:10
huge capital pools that have developed
00:47:13
because of the imbalances. So if that's
00:47:17
one point but and that's trade policy
00:47:20
but on the other side there's national
00:47:22
security policy and the only good thing
00:47:25
I can say about co is it woke us up to
00:47:29
the national security took us out of
00:47:31
this paradigm that elongated free
00:47:36
flowing the supply chains wherever they
00:47:39
may be were the best that the um the the
00:47:44
most smoothly functioning
00:47:46
was desirable. Well, it it turns out
00:47:48
that the most efficient is not always
00:47:51
the safest, the most robust or the
00:47:54
soundest. And we saw that during co
00:47:58
we we discovered that the Chinese became
00:48:01
unreliable suppliers. Uh India and some
00:48:04
of the other countries they acted
00:48:06
surprise surprise in their national
00:48:08
interest. So uh what we if you look at
00:48:12
the industries where we are taking
00:48:14
stakes and moving forward we've
00:48:17
identified five to eight strategic
00:48:20
industries where the US we have to have
00:48:24
endogenous production or at least
00:48:27
adjacent to us the in North America or
00:48:32
this hemisphere. Um we and I I think of
00:48:36
it as it's the kind of thing that you
00:48:39
would have seen during World War II and
00:48:43
we are in an economic war and we do not
00:48:46
want it to become a kinetic war but we
00:48:49
have to be prepared if if it could but
00:48:52
when when we think about huge amount 80
00:48:55
90% of the precursor chemicals that go
00:48:58
into US pharmaceuticals are made
00:49:01
overseas majority
00:49:03
in China or India semiconductors in in
00:49:08
my life I believe that the greatest
00:49:12
economic threat to the world economy to
00:49:15
the US economy more than the Arab oil
00:49:18
embargo that I lived through in the 70s
00:49:20
when I was lined up with my parents to
00:49:24
the at the pump to do odd even days
00:49:27
because of the oil embargo. The biggest
00:49:30
threat is that 97%
00:49:34
of the upper level precision chip
00:49:37
manufacturer, the advanced chip
00:49:38
manufacturers is made in Taiwan and we
00:49:42
need to bring a portion of that back to
00:49:44
the US. Uh same for steel, same for ship
00:49:48
building, same for pharmaceuticals. So
00:49:52
the interventions are all the in those
00:49:55
areas. Scott, as we wrap, I'd like to go
00:49:58
back to one topic you spoke about at the
00:50:00
beginning, which is you've had to
00:50:03
overcome a lot of Biden era difficulty
00:50:06
and a lot of the groundwork, as you
00:50:08
said, will be seen in 26 and beyond. And
00:50:11
I just want to give you a final moment
00:50:12
to talk about those in two buckets.
00:50:15
Bucket number one is there's a lot of
00:50:16
tax cuts that will hit starting January
00:50:19
1. And I think it would be good for
00:50:20
people to understand what's coming. And
00:50:22
then bucket number two, there's been
00:50:25
this incredible movement and energy
00:50:28
around Trump accounts. And you even
00:50:30
spoke about this yesterday about the
00:50:31
value of compounding and teaching people
00:50:33
the financial literacy to understand
00:50:35
what's possible for all these kids. And
00:50:37
I just want to give you a chance to talk
00:50:38
about those two topics as we wrap.
00:50:40
>> Couple points here. what we are going to
00:50:42
see next year that if you think about
00:50:47
the the signature parts of the the tax
00:50:49
bill I I think that the powerful the
00:50:52
most powerful parts uh had uh the
00:50:56
immediate expensing for American
00:50:58
business uh permanent for equipment
00:51:01
and then
00:51:03
four or five year window for factories
00:51:06
so we are seeing already seeing a capex
00:51:09
boom so 2025 was a capex boom. I think
00:51:13
that is going to accelerate with all the
00:51:15
trade deals we've done. I was just about
00:51:18
6 weeks ago in my hometown of
00:51:20
Charleston, South Carolina, Boeing, the
00:51:22
largest employer there, is increasing
00:51:24
their plant by 50% for the Dreamliners
00:51:28
result of the trade deals, but it's also
00:51:31
part of the tax deal. So, we're going to
00:51:34
continue seeing this capex boom that
00:51:36
turns into an employment boom. on the
00:51:38
other side for working Americans. The
00:51:40
president I I led the
00:51:45
administration's team up on the hill uh
00:51:48
in terms of what was non-negotiable
00:51:51
non-negotiable for the president and a
00:51:54
lot of traditional Republicans didn't
00:51:57
like his campaign promises to working
00:52:00
Americans and the president never
00:52:01
yielded on those. No tax on tips, no tax
00:52:04
on overtime, no tax on social security,
00:52:06
deductibility of auto loans for
00:52:08
Americanmade cars. So the the bill was
00:52:11
done on July 4th. It's retroactive to
00:52:14
the beginning of the year for working
00:52:17
Americans, retroactive to January 20th.
00:52:20
uh for corporates. So, working
00:52:22
Americans, I I also have the honor of
00:52:24
being the IRS commissioner, and I can
00:52:27
see that we're going to have a gigantic
00:52:30
refund year in the first quarter because
00:52:33
no one changed their working Americans
00:52:36
did not change their withholding. So I I
00:52:38
think households could see depending on
00:52:41
the the number of workers $1,000 $2,000
00:52:44
refunds they will change their
00:52:46
withholding schedule at the beginning of
00:52:49
the year and they will get an automatic
00:52:51
increase the in real wages. So I think
00:52:54
that's going to be a very uh I I think
00:52:57
that's going to be a very powerful combo
00:53:00
of corporate and individuals. And then
00:53:04
the the these Trump accounts I believe
00:53:08
are a gamecher and I think this will end
00:53:11
up more than what he did for defense,
00:53:15
more than he did for strategic
00:53:17
industries. When we look back in 50
00:53:20
years, I think this administration will
00:53:23
have saved or created the idea that
00:53:26
everyone is an equity owner, that
00:53:29
everyone has a stake in the market.
00:53:31
Right now, about 38% of Americans do not
00:53:35
own equities either directly or through
00:53:38
some kind of a 401k or something. So by
00:53:42
giving every child $1,000 at birth the
00:53:46
for these accounts we are going to
00:53:48
increase financial literacy. We're going
00:53:50
to increase people's optimism in the
00:53:52
market here at Treasury. We're going to
00:53:55
do the a dramatic amount of financial
00:53:59
literacy, financial education. We're
00:54:00
going to push that out to the schools.
00:54:03
And I I think this idea of every
00:54:06
American learning h that money can make
00:54:09
money for them that you know we we will
00:54:12
close the gap over time. We'll go from
00:54:15
38% not owning equities that if this
00:54:18
continues hopefully that can be zero and
00:54:21
everybody gets a stake in American
00:54:24
prosperity
00:54:26
that the American innovation that you
00:54:28
all do and I I think it is going to you
00:54:32
when I look at sort of the the polling
00:54:35
for young people in terms of their view
00:54:37
of socialism, their their view of
00:54:39
capitalism, I I think that this is going
00:54:42
to make you know every man Huey Long
00:54:45
said, "Every man a king." I think this
00:54:47
is going to make a the every the man and
00:54:50
woman a a a market participant. And I
00:54:55
think it's fantastic. It I began the
00:54:58
announcement the other day. I said, you
00:55:00
know, I've talked about parallel
00:55:01
prosperity, Wall Street and Main Street.
00:55:04
This is the biggest merger in history
00:55:06
because it is merging Main Street and
00:55:09
Wall Street. And I I grew up in a small
00:55:12
town in South Carolina. The only thing I
00:55:15
knew about Wall Street was something bad
00:55:16
had happened in 1929
00:55:19
and I was fortunate went to Yale and
00:55:22
then u went to New York. But you you
00:55:25
shouldn't have to have that path that if
00:55:27
you want to stay in your hometown but
00:55:29
participate in the market and learn a
00:55:31
lot about it, this is the ultimate
00:55:33
program for that. And what we're doing
00:55:36
is parents, family members, employers
00:55:39
can add $5,000. Philanthropists
00:55:43
like Susan Michael Dell are going to put
00:55:46
in $6.25 billion to top up the accounts.
00:55:50
And then we're up to probably 20 states
00:55:54
that are going to also top up the
00:55:57
accounts. Uh employers,
00:55:59
we've got uh credit card companies,
00:56:02
banks that are already on board. and
00:56:04
you're just going to keep pushing more
00:56:06
money into these accounts. Americans are
00:56:09
the most generous people in the history
00:56:11
of the world. We have never had a direct
00:56:14
way to get rid of the friction of
00:56:17
philanthropy and give money directly to
00:56:19
American children.
00:56:21
>> Yeah. Fantastic.
00:56:23
>> A real watershed moment. Um, Secretary
00:56:25
Bessant, we appreciate your leadership
00:56:27
and your service and for spending the
00:56:29
time with us here today. You've been
00:56:31
open and articulate as always and we
00:56:34
thank you for that. We appreciate it.
00:56:36
For Chimath Jason, this is the uh the
00:56:39
All-In podcast and thank you Secretary
00:56:41
Besson.
00:56:42
>> Good. Well, it's an honor to serve the
00:56:44
American people. So, thank you all.
