US Treasury Secretary Scott Bessent Talks Trade, the Fed and Trump's Tax Bill
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Bloomberg Audio Studios. Podcasts. Radio. News. A big legislative agenda for President Trump. A legislative agenda. Speaker Mike Johnson at somewhere around 3 a.m. this morning did finally secure enough votes and enough support to move that bill forward. Of course, one of the people who will be in charge for helping to implement a lot of provisions in that bill is the Treasury Secretary of the United States. And I'm pleased to say that he joins us right here on The Close. Scott Besson.

Great to have you here on the program. Let's start off with the bill. I know we are still awaiting a vote, a vote that is likely to occur today. And of course, a signing that the president himself has said he would like to get done tomorrow on July 4th. As you then fan out after July 4th to sell this bill to the public and more importantly, to implement some of the provisions, what is your number one priority?

Number one priority is making sure the American people understand that this bill is the route to parallel prosperity. It is the best of what we saw in the 2017 Tax Cuts and Job Act, along with President Trump's campaign promises, no tax on tips, no tax on jobs.

Over time, 85 percent of seniors will not be paying tax on Social Security and the deductibility of auto loans if the car is made in the United States. It also funds the president's agenda in terms of defense, border and school choice.

There's salesmanship that you and for that matter, the other cabinet members will have to do to the public. But there's also salesmanship that you have to do here, Scott, for the markets. There's a lot of concern about that addition to the federal deficit, the idea of a widening of that deficit because of some deficiencies in paying for some of those tax cuts. What is your message to the market?

Well Romain I'm not quite sure what you mean because stock market set a new high and the bond market just had its best six months in five years. So I disagree with that. So I think the markets are telling us that they like the bill and that they believe that it is fiscally prudent and stimulative for growth.

And importantly, I think we can get back to the kind of growth that we saw in President Trump's term, 2.8, 3.2 percent noninflationary growth, which the Biden administration was not capable of. Mr. Secretary, Matt Miller here. I'm wondering, as someone who grew up with Alex P. Keaton watching Milton Friedman on Phil Donahue and always thinking we were on the wrong side of the Laffer curve.

Why haven't these kind of massive tax cuts worked to really stimulate growth in the past? And they certainly haven't worked to replace the amount of revenue that's taken out. We didn't see that with the Reagan tax cuts. It didn't work out with the Bush tax cuts, and it didn't work out with the TCJA in 2017 either. Why is it going to work now?

Well, I would disagree with TCJA. TCJA was a work in progress and then we hit COVID. And I think what's different here also is we're going to be constraining spending. I spent a lot of time with the Freedom Caucus members

And their constituents should be very proud of them. They should be very proud of themselves. They changed the center of gravity of the debate. So we are both going to stimulate the economy, pick up tax revenues, but more importantly, constrain and pull down spending.

So far, though, it looks like we're going to boost deficits up to 7%. You ran on this 3-3-3 plan, 3% deficit, 3% economic growth, and an increase of 3 million barrels of oil a day in the U.S. Do you expect to get to that by the end of President Trump's term?

I do. And I'm not sure where the 7 percent number is coming from, right? Because I reject the CBO scoring. But on the other side, the CBO also scored tariff income at $2.8 trillion. So, you know, that substantially increases government revenues. I think the growth is going to be much higher. And I believe that what we've done in

constraining spending here is just the first bite of the apple. Do you anticipate, Mr. Secretary, that the U.S. government's financing needs, the Treasury's financing needs, will increase over the next couple of years? I think that...

We will see what happens to interest rates. And there could be an increase in financing needs based on yields. But everything that I'm seeing says that inflation is under control and likely coming down.

There is, of course, the cost to finance that. And we look at where yields have been, and we know there's been a lot of volatility there, some stability in recent weeks, partly because of some of the things that you've done and said publicly. But we've also seen a little bit of reticence to buy into longer-dated U.S. treasuries. I know you have been public about the idea, at least in the short term, of relying a little bit more on shorter-term treasury issuance. Do you anticipate that will continue?

Well, I think what we're going to see is one of the underreported things of the one big beautiful bill is it also gets us away from this terrible debt ceiling dilemma. And because of that, we've had to constrain issuance. So it's likely that initially we will use bills to refill the Treasury general account. Do you worry about any potential rollover risk in that strategy?

No, I don't. We've seen very durable and robust Treasury auctions. I see who the buyers are. I think that we are going to see U.S. banks take up more of the debt issuance because of the supplementary leverage ratio reliefs that they're going to be getting. And we're going to

passed the bill today. President Trump's going to sign that tomorrow. And then probably the following week, we're also going to have the stablecoin legislation, which I think could create at least $2 trillion in demand for Treasury bills. We just want to just flag to our viewers right now that

the minority leader in the House of Representatives, Hakeem Jeffries, does appear to be wrapping up his speech. And based on procedures in the House of Representatives, this means the floor would cede back to the Republicans, Matt Miller, who are prepared to vote for this bill, a bill that does appear to have the votes to pass. Right. And a bill that, at least according to the CBO, is going to...

add another almost $3 trillion to the national debt. Right now, we're looking at more than $36 trillion, Mr. Secretary. And I know you take issue with the CBO's scoring and especially the growth rates that they forecast out. Where do you think we're going to see the national debt? For example, at the end of President Trump's term in January of 2029, will it be lower than it is right now?

Well, I think the growth is going to be much slower. And one of the things that Secretary Yellen and I agree on is not the absolute level of the debt. It's the debt to GDP. So I think we are going to see the debt to GDP well into the 90s by the end of President Trump's term. Well, we were talking to Stephen Myron this morning. He expects that this bill will

bring down the national debt by between $5.5 and $11 trillion 10 years out. Does that make sense to you that we could see a lower absolute number at the end of the decade after this legislation is passed?

Well, again, I think that it's very difficult to predict 10 years out. But you just said that CBO expects $3 trillion at the end of the window. But they've also said that there's $2.8 trillion in tariff income that we didn't get scored. So a lot of moving pieces here, but I'm confident that we're going in the right direction.

So, Mr. Secretary, I do want to get your thoughts about just broader policies coming out of this administration beyond just this one big, beautiful bill that is now appears to be advancing in Congress. There's been a lot of questions in the market about what the administration's stance is on the dollar, whether there truly is a strong dollar policy or whether that policy, a long term policy of strong dollar support has shifted to something else.

I'm not sure why that is in the market. The price of the dollar has nothing to do with a strong dollar policy. Current currencies move up and down based on a variety of factors. But a strong dollar policy means several things. One is

What is the dollar strong against or is another currency stronger, higher in price at the moment? That doesn't have anything to do with a strong dollar policy. The strong dollar policy is are we doing the things over the long term to ensure that the U.S. dollar remains the reserve currency of the world and

We are. We are setting the stage for economic growth. We are constraining inflation. We are making the United States the best destination for global capital. And I think that's going to continue to happen. I think, as I said,

You know, many times over since World War Two, the demise of the dollar as reserve currency has been predicted. And I think once again, the skeptic is going to be wrong. But there is there is no change in policy. Fair enough. But I'm sure you understand that the weakness that we've seen in the dollar to start the year is.

is something we have not seen in decades. And there are other countries that have been trying to take advantage of it. In a speech just this week, we heard from the Chinese central bank governor who really laid out at least their vision, their Chinese vision, for a new global currency order, which would, of course, mean a reduced rule for the dollar and, in their view, a greater rule for the yuan. Now, regardless of whether that is a viable plan, I am curious as to what you think about the idea that this is even being spoken about publicly.

Well, I mean, look, what are the Chinese going to say? And by the way, it's a complete fallacy. They have a non-convertible currency. So how are they going to be a reserve currency? They also have 1.4 billion people who want to get their money out of China. They have capital constraints on taking out money.

sine qua non for a reserve currency is that it trades freely. And I saw my friend Christian Lagarde, president of the ECB, the other day said that maybe this is the euro's moment. But I can tell you, if the euro hits 120, Europeans are going to be squawking that it is too strong. They are an export economy. So

let's see what happens. They should be careful what they wish for. Whereas in the United States, we recognize the responsibility that comes with being a reserve currency. I want to ask about this Republican Party's

seeming shift to support blue collar workers. We've seen a wage boom among those people, an increase of 1.7% in the first five months of President Trump's term. And that's, I think, the fastest growth we've seen for that segment since 1969. You talk about no tax on tips. You talk about no tax on overtime. Why do you think that this party has really shifted to become the party of the blue collar?

Well, I'm going to correct you on that because it's the fastest we've seen since 2017. Previous to President Trump was 1969. And look, this is the party that delivers for working Americans.

The Biden administration wiped the floor with the bottom 50 percent of wage earners, that the great inflation, the official statistics were around 20 percent for President Biden's term, but really for the

package of goods and services that working Americans buy, it was well in excess of 30%. So there was a real decrease in purchasing power. In President Trump's first term, we saw hourly workers, non-supervisory workers' wages increase faster than supervisory workers. We saw the bottom 50% of households

have net worth gains in excess of the top 10%. And again, my message here is parallel prosperity. Both sides can do well, but we are focused on Main Street catching up to Wall Street, but it doesn't have to be one or the other.

At the same time, the CBO has projected that this one big, beautiful bill act passing would result in 7.8 million people being taken off the Medicaid rolls. They would lose their health care coverage. And we've seen also projections that millions would lose SNAP benefits. We're talking about single mothers with children. We're talking about people who have difficulty dealing with the health

untamable bureaucracy of government. How can you make that kind of move with compassion? Well, let's start. 1.4 are illegal aliens, so they're not supposed to be receiving Medicaid benefits. The approximately 5 million to 6 million are what we believe are able-bodied adults. So there's going to be a 20-hour period

a weak work requirement. And we are saying that this needs to get back to the people who Medicaid was meant for. It was meant for pregnant women. It was meant for mothers. It was meant for children. So we are focusing on the benefits for those who need them and not the able-bodied.

We're in conversation right now with the U.S. Treasury Secretary Scott Besson. For our viewers worldwide, we should point out that Speaker Mike Johnson is now on the floor of the House of Representatives, presumably to move forward with a formal and final vote on that tax and spend bill. Mr. Treasury, Mr. Secretary, I am curious about what comes next after this. We know that we ostensibly have this July 9th deadline on trade, and I know it's going to take several weeks, if not months, for

following that to really start to hammer out some of these deals. Do you anticipate that we're going to see additional deals and more substantive deals pretty soon within the next few weeks? I think we're going to see a flurry of deals before July 9th. We'll see how the president wants to treat those who are negotiating, whether he's happy that they're negotiating in good faith. I think that we're going to see about 100

countries, who just get the minimum 10% of reciprocal tariff and will go from there. So I think we are going to see a lot of action over the coming days. Have you been directly involved in any of those negotiations? And if so, are there specific provisions that those other countries have been asking the U.S.?

Well, I'm not going to negotiate on international television, but I will say... You don't have to negotiate. Just tell us. Well, yeah, sorry. What I would say is some...

Countries have come with or trading blocks have come with good deals. Some have come with OK. Some have come with deals that are unacceptable. And we are going to be announcing several deals. The president has the final say. And what I can tell you is that the career staff, whether it's a treasury, commerce,

USTR are all saying that they can't believe that these countries are giving up things that they haven't seen them offer in the past two or three decades. So this is a win for the American people. It's a win for fair trade. Can I ask just finally about the pressure the president and others in the administration have put on Jerome Powell to cut rates? President Trump has

asked now for three full percentage points of cuts, 300 basis points. And it strikes me that that would either overheat the economy or cause absolute chaos in the Treasury market. Don't you think it's important that the Federal Reserve operate with an amount of independence?

Well, the Federal Reserve does operate with an amount of independence, just like a referee does out on the floor of the basketball court. They're independent, but the coaches work the refs.

all the time. President Trump is the most sophisticated president economically, perhaps in the past hundred years, perhaps ever. I will note that in his first term, he was more right than the Fed was on when it was time to cut rates. Fed normally followed later on. So I think he's going to make his

views known. And I would also point out that the market agrees with President Trump in terms of the direction, if not the magnitude of the cuts. Do you agree with President Trump that the Fed should cut by 3 percent in July? I believe that I followed the market and the market both for the rest of the year and the two year market is signaling cuts.

Well, we really appreciate your time, Mr. Secretary. Thank you so much for joining us. And I suppose I could say congratulations on the big, beautiful bill. Treasury Secretary Scott Besant talking to us here on an early edition of The Close.

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