US Treasury Secretary Scott Bessent Talks Trump Tax Bill, Trade and the Fed
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I'm Shanalee Bassack and we are now joined by U.S. Treasury Secretary Scott Besant. Just as the Senate has begun voting on what's known as the big beautiful bill, you look at the latest version of the tax bill, the big question that remains is the GOP holdouts. What kind of deal can be cut with those holdouts and what are you and the President prepared to offer for support?

Well, I'm confident that the bill is going to progress as is over the next few hours, and it'll be on the president's desk to sign on July 4th. So the Senate will vote, pass it over to the House. We've seen incredible leadership, and this is what leadership looks like. So President Trump, the president

Speaker Johnson, Leader Thune, and at the committee level, Senator Crapo and Chairman Jason Smith have been fantastic to work with. And again, it all goes back to leadership. Now, when it comes to the fiscal hawks, has the administration made any assurances about executive orders or legislation down the road to address the national debt load? Well, I think everyone believes that this is a start.

So it's an 11% cut in non-discretionary spending, and we're going to go from there. So we didn't get here all at once. We've gotten here 20 or 40 years, and we are going to bend the curve, bring the debt levels down. I'm a fiscal hawk. I've had a lot of very good meetings with the

that group and I think we're all on the same page on how to grow the economy while controlling and bringing down expenses. Now let's talk about some of the math there as well because if the GOP is right and the bill does look to shrink the deficit how will that affect Treasury issuance over the next 10 years? How

does your math square with the CBO, with Wharton, with Yale, and even the Bloomberg consensus of GDP projectors here, economists, that still see growth under 2%? Well, I think that's just wrong. And we can start with the CBO, is their model presumes 1.8% forever.

And maybe under democratic governments, that's right. I think what we saw under President Trump's first term is that we will get a big boost in the economy from the tax bill. We're going to have certainty. We're going to go back to 100% expensing. So we are also deregulating at the same time. So we saw it in Trump 1.0, I think,

that we can see it here. So I think we can really accelerate the economy because the CBO model shows 1.8% growth, whether we have the biggest tax cut in history or we get this across the line and give

companies and consumers great certainty. You mentioned that the spending cuts were just a start. Now, which will prevail when you think about the cuts specifically as it pertains to Medicaid? Will the House level of cuts to Medicaid prevail or the Senate level? And which one will the president support?

We'll see. My sense is, and again, I take exception to cuts. We are actually bending the curve further out. We are getting able-bodied people back to work and

And the most needy will have greater benefits. Well, the main question, too, is the benefits that are being cut. What do you tell the nearly 12 million people that are on the brink of losing access to Medicaid? Well, again, that's not right. 1.4 million are illegal aliens, then a huge percent of that are the able-bodied working people

will need to go back to work. So we're going to have a work requirement and we'll go from there. We're just going back to the levels pre-COVID. So given where the bill is, how does the latest bill impact the trajectory of the debt and deficit in your view? Well, again, I think as we accelerate growth, an increased growth trajectory

completely changes the debt dynamics. So what we're focusing on is the debt to GDP. We're going to start bringing that back down. We are going to pull down the deficit to GDP. And I think we will be turning both of those down over the next year.

Does it give you, though, enough confidence to start terming out the debt? At what point do you start issuing at longer-dated maturities? Well, why would we do it at these rates? We are more than one standard deviation above the long-term.

We're more than one standard deviation above the long-term rate, so why would we do that? The time to have done that would have been in 20, 21, 22. So a lot of people in the market point out to the success that has been in the bond market.

You have seen the 10-year come down almost half a percentage point since the January highs. Where would you like to see the 10-year, and where do you think it could end by the end of the year? Well, I think it's going to depend on a lot of things, but I think that we could see a further...

lowering of rates. I think inflation is very tame. I'm not going to comment on Fed policy, but I've said that I am focusing on the 10-year. So as we see inflation come down, I think the whole curve could parallel shift down. And I'll point out when everyone says, oh, the market

the bond market's worried about this or that in the U.S. U.S. is the only major bond market that has lower tenure rates than any other country. Every other country, the rates are up.

While we're talking about interest rates and the Federal Reserve, it has been recently reported that you might be in consideration for the job as the next Fed chair. When you've been asked about the likelihood recently, you said that it's up to the president. Is it a job that you would want? I will do what the president wants, but...

I think I have the best job in D.C. We're making a lot of progress with the president's leadership. Think about it. We are going to have the tax bill on his desk by July 4th. We're going to be wrapping up the trade talks. So I think we've had great momentum, and we will be working on...

Chair Powell's successor over the coming weeks and months. You had mentioned that an announcement could be as early as October or November, and Powell's term ends in May of 2026. How is the street supposed to navigate between that announcement time and the time between the

term being over for Chair Powell. You were the one, I want to remind people, that had brought up the idea of a shadow Fed chair prior to the election. Is a new appointee supposed to be considered that shadow Fed chair? Well, not necessarily. We'll see. There's a seat opening up, a 14-year seat opening up in January. So we've given thought to the idea that perhaps that person would go on to become the chair when

Jay Powell leaves in May, or we could appoint the new chair in May. Unfortunately, that's just a two-year seat.

Ultimately, do you think that there could be some confusion? Well, I don't see why there would be confusion because, you know, obviously there are people who are currently at the Fed who are under consideration. So why would there be confusion if you add another candidate in January? So what about Fed policy as it stands today?

The president has voiced his preference for lower interest rates. There have been investors, but also most recently the Bank of International Settlements, warning about any inflation risks tied to the tariff policy. Realistically, how much can the Fed lower rates this year? And what is the level and rate of unemployment that would suggest a faster pace of rate cuts? Economically, what has to slow?

Well, look, I said during my confirmation, I won't talk about the mistakes the Fed's going to make. I'll only talk about the ones they have made. They made a gigantic mistake in 2022. And as I like to point out, medical studies have shown that people who fall tend to look at their feet, which makes them fall more. And my worry here is that having fallen down on the American people in 2022, Fed's now looking at their feet,

We have seen no inflation from tariffs. If we do, which we don't have to, then there'd be a one-time price adjustment. Nothing is more transitory than that. So, you know, Team Transitory, having failed the American people in 22, they seem a little frozen at the wheel here.

Part of this uncertainty does relate back to the trade deals. You've set a deadline for July 9th with key trading partners, or at least the administration in total has. How many of the key 18, the 18 most important partners that you have been speaking about, have deals that will be agreed to by that time? We'll see. I'm not going to negotiate on TV and let people off the hook.

but as always is going to be a flurry going into the final week as the pressure increases. What can you tell us about what's coming out of those deals? Are they inked deals or are they negotiations for future deals? Well, what I can tell you is that

The staff level, whether it's at Treasury, at USTR, at Commerce, people who've been around for 20 years are in amazement. And they're saying these countries are coming with offers that they can't believe. So in terms of bringing down tariffs, non-tariff trade barriers, we're leaving aside currency, the financing of...

labor and capital in an advantageous way, all these countries are pulling back. So you've said that trade negotiations could be wrapped up by Labor Day. How should investors and nations impact and be thinking about that July 9th deadline? And

Could that be pushed back to avoid going back to those April 2nd tariff rates? Well, that's going to be up to President Trump. And I'm not going to tell any country. We have countries that are negotiating in good faith, but they should be aware that if we can't get across the line because they are being recalcitrant, then we could spring back to the April 2nd levels. I hope that won't have to happen.

So one other part of the tariff strategy that a lot of investors have been asking about is related to the housing affordability crisis. There are still Section 232 tariffs being seen as it retains to lumber and timber. Those are key materials for housing construction.

Are you in support of them ultimately given where we are in the housing affordability crisis today? Well, I think it's important to break down. So what we're negotiating now are the reciprocal tariffs. 232s take longer to implement. So we'll see what happens with those. Also on the housing market?

What kind of timeline, well, first of all, is Fannie and Freddie going to be privatized? And what type of timeline would you look to do that on while also ensuring that mortgage rates won't skyrocket on the heels of such a plan? Well, let's work backwards on your question. Anything we do...

We will be focused on the mortgage rate, the spread of mortgages over treasuries, and ensuring that that does not move. But, you know, I can tell you that we have been busy with peace deals, trade deals, and tax deals. And once peace deals going well, tax deal done on July 4th, a trade deal wrapping up midsummer, and then we will focus on Fannie and Freddie.

One more question for you. Another thing that is making its way through Congress is legislation as it pertains to cryptocurrency, but right now stablecoin. Will this bill help in terms of making stablecoins a bigger force in the payments market, in the treasury market? Will they be a larger force of what absorbs new treasury supply?

What you're referring to is the Genius Act. The Senate's passed it. It's now with the House. President Trump, myself,

much of the Senate leadership and many in the House are encouraging them to pass the Senate bill as is. I think we could have that also done by mid-July. And I think stable coins create an exciting new payment rail. And importantly, it will be a source of demand for the U.S. Treasury market. Because if you think about it,

in terms of preference globally, would you rather have a private stable coin that's backed by U.S. Treasuries with U.S. best practices regulation, or would you rather have an ECB or a PBOC, central bank digital currency, that if you write a mean

the ex-post, the government can turn off. I think everyone is going to choose the U.S. private sector with U.S. regulation all day, every day. Secretary Besant, we appreciate you joining us here in our New York studio. That is the U.S. Treasury Secretary, Scott Besant.

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