Scott Bessent: Fixing the Fed, Tariffs for National Security, Solving Affordability in 2026

Secretary Bessent, welcome back to All. In. We appreciate you taking the time to. catch up with us and provide this first. year in review. We're excited to have you here and hear. how things are going and what's ahead. regarding the fiscal condition. of the US government, the economic. condition of the US economy, including. how things are going for Wall Street and. Main Street. And finally, we'd like to. broadly discuss some of the. administration's policies, decisions, and how they're playing out or will play. out from your point of view. I'll start.

us off and maybe to catch up on our last. conversation, one of the things that. I've cared deeply about and which you. shared an objective around is getting. the budget deficit below 3% of GDP. I'd. love to hear from your point of view how. that's going and how things are looking. for fiscal year 26, the actions that. have been taken and and what you think's. ahead for that target. Good to be with. you. Happy to review the year, talk. about next year. There's a lot going on.

I would categorize 2025. We had some. important victories, some. [clears throat] important policy. announcements, some important movement, but I as I've described it, 2025 was. setting the table and I especially on. the economy, I think the feast and the. banquet's going to be in 2026. To start with the budget deficit, we didn't get much credit because it. came out during the shutdown. The US. fiscal year is on September 30th. We had.

a slight fiscal contraction for the. year. Wasn't much, but much better than. the 2.0 trillion that was estimated. We. came down from about 1.8 trillion to. 1.78. So, a contraction nonetheless. For the. calendar year, we're making great. progress. And just to put it in context, Biden administration, they blew things. out front trying to get Vice President.

Harris elected in the fourth quarter. So, last year, 2024, 40% of the government spending occurred. in the fourth quarter as they you know. had the un. successful. their unsuccessful attempt to convince. voters that they. weren't in a world of hurt. I forecast. that we will have approximately a 200 to. 300 billion fiscal contraction. for the calendar year, which is between.

0.7 1% of GDP. We're going to end the. year with nominal growth close to 6%. So, we will be bringing down the deficit. to GDP. I believe it peaked 6.8% for the. calendar year previous year and we're. going to be in the mid-fives. So, it's a. very good start on an important journey. And I've said that I would time. President Trump leaves office that we.

would like to. have something with a three in front of. it, which will stabilize the deficit to. GDP, which is important number, and. enable us to start paying down debt. Scott, it seems like the tariffs have. had an enormously positive impact. It's. given you. a lot of tools in the toolbox to work. with. Why do you think so many people got it. wrong? A lot of people, I'm sure that. you've known and worked with in your.

prior life as a hedge fund manager, what did they get. wrong? What did they miss that you were. able to see? Well, I I a couple of. things. I I think people didn't have an. open mind. They became the Trump tariffs, which. immediately a large cohort whether it. was government officials, industry. people, the general population, because. President Trump wanted to do it, it must. be bad. I said the other day, President Trump. cured cancer, but it caused dandruff,

then people would say, well, you know, President Trump has caused a dandruff. epidemic. And [laughter]. look, there's a lot of orthodoxy that. hasn't worked. If we look back, early 2000s, letting China into the. global trading system that they would. become more like us. And there was a. point and I'm somewhat sympathetic to. the people who believed that, but by. 2013 when Xi Jinping came in and great.

writers like Elizabeth Economy who had. been of that view reversed and said, he's a different kind of cat. It's no. longer going to be Chinese policies with. capitalist tendencies. It's just going. to go back to hard communism Leninism. And I I just think that. it was a failure of imagination. I've. said several times, people and maybe. we'll talk about it today. When people.

ask me, what are you looking for in a. Fed chair? I said, it's someone with an. open mind. If we go back to the 1990s, Alan Greenspan did a magnificent job. because he had an open mind that the. internet office modernization boom was. going to create a productivity bonanza. for the US economy and he let the. economy he let it rip and we had an. incredible economy, paid down a. tremendous amount of debt that by 1998,

1999. with the combination of. Clinton administration having gotten. religion, Newt Gingrich and his. policies, there was talk that at the end. of the 90s that there might not be. enough government debt to meet the needs. of the financial system, which is the. opposite of what we have now. So, again, I I would. part of it was just anything the.

president does must be wrong. Part of it. was a failure of imagination. And. there's some very good studies coming. out now that are showing why why. everyone has been wrong. That the. the measurement problems they're on. the increase in goods prices. There's a study from not a friend of the. administration, the San Francisco Fed. with 150 years of data. I would refer. everyone to that. This shows that.

tariffs do not cause inflation, that. they're actually disinflationary. So, has any anybody read that study? Scott, has that been, I would say, a part of. the conversation. in the administration now that there is. this new revenue stream for the federal. government, there's an opportunity to. cut taxes and cut other sources of. revenue for the federal government and. that could potentially accelerate the. economy. But balancing that question. against the importance of cutting the.

deficit, how do you think about the. balance between using tariffs as a. mechanism for reducing the tax burden on. the economy versus using the tariffs as. an incremental revenue source for the. federal government to start to reduce. the deficit and pay down the debt. eventually? David, before I answer that, another thing I want to go back to is. President Trump. One one of the reasons. for the success of the tariff policy, or. I'll give you two reasons. One is the. President Trump uses them for national.

security. So, the tariff policy has. become part of national security. He was. able to use the tariffs to negotiate. trade deals. When he ratcheted up some. of the tariff levels to 35, 49, 50%, even 145 with the Chinese, it brings. people to the table. In. the spring, President put fentanyl. tariffs on Mexico, Canada, China, they've all come to the table to.

help and partner with the US government. to end this scourge on our people. We're. seeing fentanyl deaths drop we because. of the good efforts of China. We made a good faith move and decreased. our fentanyl tariffs by half down to. 10%. So, if that's been national. security, same thing on October 8th when. Beijing announced that they were going. to put a worldwide export licenses on.

any. any product that had 0.01% of Chinese. rare earths in it, which would have. ground the the western trading system to. a halt. President Trump was able to. threaten 100% tariff and the Chinese. immediately came to the table. The other thing that I would say, so so. that's all national security. The other. thing that I would say that people. missed that I was convinced of is that. the Chinese business model is based on. volume, it's based on employment, it's.

based on a five-year plan, and I I think. everyone neglected the idea that despite. the the tariffs, the Chinese were going. to keep producing. That it's one of. these they may lose a dollar on every. product, but they make up for it in. volume. Can we forecast these tariffs through 28. or do you think that we have to have. moments where whether it's the Supreme. Court who's opining on. one body of language versus another may.

change your course. But do you feel. confident that we can forecast these. revenues now out through the balance of. President Trump's term? Well, I I think. the I think the revenues are are a. combination of revenues. So, the the. ultimate goal of tariffs, the the. revenue collection, I think but of in a. way is a payback. for. the imbalances that have gone on over. the years. But over time, the the real. idea is to balance trade and reshore.

manufacturing and bring our economy into. balance with our trading partners. So, what should happen is over time tariff. income will come down and US tax. receipts will come up whether it's from. factory jobs or more manufacturing and. through higher payroll taxes. So, you we. will we will start off at this very high. level, then we will rebalance and come. up. So, I I I think it's difficult to.

know the timing. We know the direction, we know the destination, but the the. timing's difficult on tariffs versus. increased domestic tax revenues. What. what I can say is when when I got into. the investment business in the 1980s, there was always a focus the on trade. and how much were we making in the US. And again, that everything made outside. of the US is a decrease in US GDP. So, as we bring it back, I think we're going.

to start looking more. at. the. the content of trade versus domestic. manufacturing as a component of GDP. acceleration. As we wrap tariffs, we have a Supreme Court ruling coming in. January. What happens if that goes. against the administration? Well, I I. don't think it's against the. administration. I actually think it's. against the American people and. it will be again, as I said, it it will.

be a hit to national security and the. the the revenues aren't the the focus. here. The revenues aren't the focus. The the. the revenues can be replaced, but all. all the things that President Trump has. been able to do using tariffs on the. national security side will be will be. jeopardized. Would you be able to just work with. Congress on them? That's seems to have. the constant seems to be how the. Constitution was designed. Is that the. Congress would have this authority? So, why not just work with them? Is that the.

fallback plan? Well, why would you say. Congress would have what authority? Well, the Constitution has tariff. control. So, that's at least my. understanding of the US Constitution and. I think that's why there's a Supreme. Court case, correct? Uh well, they we'll. see. The the president has has the right. under IEEPA the for licenses. We've also. seen um. It it was I I was at the Supreme Court.

and for your for your viewers, a bucket. list event should be going to see a. Supreme Court hearing. It it it it is. in terms of any institution that is the. closest to what our framers designed and. kind of jumped into business in 1789, it. is probably it is surely the closest to. what what you would have seen at the. court. They're very convivial with each. other. Yeah, I listened to it. It's. quite compelling content, yeah. Yeah,

it's it's and to to be there in person. it not not my political leanings, but. Justice Kagan the was just an intellect. of towering. impressiveness. I came away thinking I. am glad that Justice Alito is not my. father uh because he [laughter] he he. he he he is smart. Uh he is uh bombastic. and when when he he got the knife into a. couple of the plaintiffs.

in a line of questioning and he. uh move moves it around quite a bit. So, um [clears throat] but. one one line of questioning in in this. that one one of the plaintiffs agreed on. was so and it was either from Justice. Alito or Justice Kavanaugh was you were. telling this court that the President of. the United States can do a 100% embargo, but he cannot put on a 1% tariff. And. the plaintiff said, yes. Yeah, and that ruling is coming out in a.

few months. It it's January or February. >> January expectation, yeah. January. February and Jason, to your question, uh. I I I don't I don't know what the ruling. is going to be. My my guess is everyone I I think that. framing is very important in any issue. and I think the framing thus far has. been very poor because it's viewed as. 01. It's up down and I my guess is it. will be more nuanced. Having been in the.

room for instance, I I think. uh many in the media were at a different. hearing than I was at. So, when Justice. uh Barrett Coney Barrett said, if we undo this, it'll be a mess. That was viewed as just it will be a. mess as opposed to. I believe she was actually leaning. toward looking for a reason not to undo. it because it would the refund she was. referring to the refunds. The president.

has absolute ability or the executive. branch has absolute ability through. 301s, 232s and something called 122s to. raise revenue on trade. So, uh so. using the IEEPA is not a stretch of that. authority. Okay, so I I think the. question and I really appreciate the. introspection here on year one and the. optimism for year two. Wall Street, the. tech industry, we've absolutely loved.

the results in year one. My portfolio. has surged, so that's fantastic. Thank. you. Probably beyond my expectation, but. Main Street is particularly displeased. with the Trump administration's first. year. Your net approval rating is the. lowest on two key issues, inflation, net. approval rating down about 30% on. average since the summer and on the. economy, 18%. net negative. And so, this is quite. paradoxical obviously since Trump was. elected. and considered historically very strong.

on those two specific issues. So, my. question to you is are the American. people wrong. or maybe did President Trump set. expectations too high during the. election. or do you just need more time to execute. and you're asking the American people. humbly to give you more time? Well, I I. I think it's C because as Vice President. Pence has said, we didn't get here. overnight. We inherited a mess and I. think 2026 is going to be a a very good.

year for the American people, for Main. Street. And what we are not going to do. is A, which is what the Biden administration. did and many commentators, whether it. was Greg Ipp in the Wall Street Journal, the toxic Paul Krugman, who I seems to have been booted from the. New York Times and is relegated to. Substack or the former Vice Chair of the. Fed, Alan Blinder. And they said, oh no, you. don't understand how good you have it. You. eat your grit.

drink your grog, have your bread, peasants. Uh we'll give you a little more that you. it's a vibe session and we're going to. explain to you why you have it really. good. We understand that the American. people are hurting and I think the way. to think about it is there's a price. level. that things. appreciated to during the Biden. administration, then there is the. inflation level. The price level has. gotten very high. Uh.

I think cumulative CPI during the Biden. administration was 21, 22%. There's a. Wall Street firms called Strategas. Research. They do something called the. Common Man Index and it is what do. working families need? Gasoline, insurance, uh. autos, mostly used cars, rent, staples and that appreciated by by 35%. So, people are seething over the high. price level and as we saw in the.

inflation print this week, uh inflation. is starting to turn down and. affordability affordability is two. parts. It is getting the price. is under control. Some things we can. decrease. Gasoline is coming down. substantially. I would expect that it. would come down much more. Oil is down. substantially. Gasoline follows it with. a lag. Uh rents are down and we are now.

seeing the effects of what 10 to 20. million undocumented people coming into. the country did for rents. This mass unfettered immigration for D. and C rent levels was through the roof. There there's a study from Wharton that. shows that one 1% of population increase. in in a city leads to 1% rent. So, you. know, we can see why rent went up. That. if the migrants are going home, we are.

now seeing rents are down about 5%. I. think that trend will continue. Again, the inflation numbers are. starting to roll down. I think that they. will. And then the other side is real. incomes, which I think are starting to. accelerate. Real incomes are about up. about 1.8% since President Trump took. office and that's back to the Main. Street question. So, just one quick. follow up there and I'll give it back to. my compatriots. We need more time. This is not a.

one-year project. It's going to take two. or three years and we're not going to. gaslight you. and the numbers are looking good. On. that note, we had the shutdown October. numbers were not complete. There's a. bunch of reports now and hand-wringing. over those numbers. I think maybe you. could address it, which is the BLS. filled in a lot of the non-survey data. sources with. some zeros, uh and potentially the. criticism now or the concern. on Wall Street and from analysts is that.

maybe this 2.7 number is over. optimistic. Maybe you could address. people's concerns, and can we trust you. with the numbers? I think is what Wall. Street's saying. Uh well, you know, I I again, it's. amazing when a good number comes out, then it switches to that. And Jason, just let me tell you, every. every Wall Street predictor on Bloomberg. was wrong. So, what do you do when. you're wrong? You blame the measurement, you blame the the data. And there. there's always a lot of imputed data.

that in any of these numbers, that's why. we get revisions. And I I'm looking at I. was looking at the numbers, and. paradoxically, the two things that I. think are coming down the fastest, which. are rent, uh also it's known as the. owner owner-occupied. uh funding or owner-occupied rent, uh. that was actually up on the month. I. believe it is uh. turned negative. And then the other. thing that was up was energy and.

gasoline, which we can is an observable. event that those prices have decreased. substantially uh from September-October. So, I I actually think it was a a pretty. uh accurate number. So, you've checked. into that. The BLS numbers from October, you feel confident they they put those. placeholders, they put those assumptions. in correctly. You feel confident in. that. Look, the the the BLS is problematic. We've we've seen that the whole time. I.

have no reason to believe that this is. any less robust than any other data. series. And I I would say with with. rent, with uh energy, that those are. very large components that have turned. down substantially that were actually. recorded a gain for that measurement. period. Just to build on that, we had. people on our team go and run our own. analysis, both using interpolation and other data. points, and we get to exactly Scott's. numbers. And frankly, on on the margin,

sometimes slightly better. So, I think. the trend is very much what you and. Kevin Hassett have been talking about in. the last couple of days. And gentlemen, I would also point you to uh. Fed Governor Stephen Myron, who came. came from CEA, he'll be going back to. CEA probably in February or March, delivered a very robust uh speech at. Columbia either week or two ago, and he. made some very interesting measurement. points on inflation. So,

one one piece of the inflation component. there is financial services, and that. goes up based on whether the stock. market's up. That's right. When in fact, portfolio management costs have come. down, that it is showing an increase in. costs. So, uh that. at Back to Jason's question on BLS, uh how how robust are the numbers? I I. think there are a lot of changes that. could be adjusted to give us a better.

picture. Let's stay on the affordability. topic, and I would like to go to this. essay you wrote, which is uh incredible, The Fed's New Gain-of-Function Monetary. Policy, which you wrote in The. International Economy. We'll link to. this article. A lot of it goes to how. the Fed, in many ways, has exacerbated. the sense of equality and the actual. factual inequality. But before I ask you. that narrow question, Scott, can you help our viewers just. take a step back and give us a little. bit of historical context on the Fed.

itself? So, we had a central bank in the. 1700s, in the 1800s. Andrew Jackson got. rid of it. It came back in the early. 1900s. When we established it then. versus what it's doing today, and you studied this carefully, can you. help us understand and contrast and. compare how it started and versus how. it's going? Sure. So, Fed was created in. 1913 as a response to the panic of 1907, which people most people don't know.

about. Uh it made the crash of '29 look. like a day at the beach. Knickerbocker. crisis, yeah. The Knickerbocker crisis, and just the a domino effect within the. financial system. There there was no central bank. Bank of England is a very old central. bank and had been functioning well. Uh. J.P. Morgan actually had to personally. step in. uh in the crisis, and it was deemed that. there should be a mechanism for the the.

government to be able to. either wind down, provide liquidity, and. have have a greater control in the. economy rather than private operators. For much of its history, uh Treasury. uh had a seat at the table on the. Federal Reserve. Post World War II, that stopped. And. then [snorts]. if we look at more recent history, what. happened after after the Great Financial. Crisis, we saw this paralysis in the. economy. I think a huge part of it,

which has been part of my regulatory. agenda here at Treasury this year. through the Financial Stability. Oversight Council, is undoing these the. poorly thought-out crisis. crisis legislation. But what the crisis legislation did, and. look, after financial I studied and. taught at Yale the history of financial. crises, there's always retribution. And you you go from a lax regulatory. regime to an over-constricted regulatory.

regime. So, coming out of the traumatic. GFC, for for 10 years, we had this over-. constricted regulatory regime, where the. Fed was deemed to be the only game in. town. So, you know, imagine. one one example would be a a home in. North Florida that sold for $500,000 in. 2006. All of a sudden, people are. handing the keys back. It is now.

$150,000. Great buy, great affordability, but. because of the new financial regulation. and the incentives that the banks were. in some cases rightly taken to the. woodshed for bad behavior, but there was. no incentive to give credit at the. bottom. So, what happened? The. asset owners, people with money, were. able to accumulate assets. We saw very. poor growth during the period during the. Obama administration. And the the Fed.

kept kept rates low for very long, but. what the Fed engaged in, starting I. believe was October 6th, Octo- excuse. me, March 6th or March 8th uh. 2009, was the Fed began began what we. call QE or large-scale asset purchases. They went in went in the market, started. buying long bonds, and the theory of the. case there is you create liquidity, you. take safe assets out of the market, uh. long-duration safe assets, and then the.

people who receive that money uh would. buy uh more uh risky assets. Ben. Bernanke famously said, when he was. asked, "What's the purpose of QE?" he. told everyone, "Go buy equities." Well, not everyone could buy equities. So, you. we we ended up with with this this. two-tier economy, where either you were. an asset holder or you weren't. And the. the Fed constant probably kept or.

definitely kept QE going for too long. And you know, I I called the Fed the. engine of inequality, and someone said. to me, "Would you believe that the Fed. is responsible for economic equality in. the system?" And I said, "Absolutely. not. That is not one of their mandates, but they shouldn't be exacerbating it.". And they were the the leading cause of. it. There there's a fantastic book by a. uh I I know Karen Petrou very well. Uh.

she's. center left to maybe hard. >> not your politics, for sure. >> Not my politics, but her book, The Fed, The Engine. >> is excellent, yeah. uh. uh Engine of Inequality, so we just kept. pushing up these asset prices. And then. then we got COVID, and uh. markets became disorderly, and the Fed. did exactly what it should do. It came. in, it stabilized the markets, but for. some reason, they decided that they. needed to continue this QE right up.

until the 20 I think February-March of. 2023, and they were in essence financing this. massive debt increase, 7 trillion, that. we that we saw during that period. So, it's a long way of saying, the central. bank has become much more involved in. the economy. I think a lot of people. don't understand we've gone from what. used to be fairly straightforward. rate-setting mechanism to now we have.

kind of this three-headed beast at the. Fed, or this very complex calculus that. I don't think anyone really understands, myself included. Uh you have. rate-setting policy, you have uh balance. sheet policy, so the Fed has a very big. balance sheet now, and then you have. regulatory. Well, there's a part of your. article which was stunning to me, where. you describe how the budget of the Fed. works. And effectively, when you.

understand that, there's a part of the. Fed which acts like a hedge fund. And. effectively, is taking risk, and the. revenues that they generate are used to. subsidize their operations. Can you. explain that for folks? Cuz I I didn't. fully realize that that was happening. Yeah, well well, uh again, the the Fed. should make money. Fed typically you used to make money and. would remit money back to the Treasury. and back to to David's question on the. budget deficit, the Fed was sending back.

about 0.3% of GDP through. we have seniorage which is the float on. the currency. There are other operations, but then. they started QE and no one told the Fed. that you're not supposed to buy high. So, they paid a high high price for bonds, low interest rates, and. they're arbitrage. The Fed's losing. about a hundred billion dollars a year. now. If you look at one of the key.

drivers of. Main Street's satisfaction with their. economic standing, it's the price of. debt, the ability for them to buy a. home, to buy a car, to extend their. lives. And we've got the 10-year Treasury. sitting I think 4.2 to 4.6 right now in. terms of the rate. And I guess this may. be a question that brings in two other. issues, the fiscal issue and the. economic issue. Is that a reflection of. the state of the fiscal affairs of the.

federal government, the state of the. economy, both, or the state of markets. selling off bonds? And doesn't the Fed. have an important role to play in. bringing those rates down and making. rates accessible for Main Street? Well, I think what the the Fed did, unfortunately, they took modern monetary. theory from I say they went from MMT, modern monetary theory, to MMP, modern. monetary practice. So, the. the the Biden administration issued all. this debt and the Fed the Fed bought it.

And. there there's a very good study from MIT. that's come out that shows. in a way that only PhDs at MIT can be. very precise, 42% of the great inflation. was caused by the budget deficit. Another 17% was caused by the increase. in inflation expectations, which I think. you could tie back to that. So, you've. got almost 60% David that was caused by. the spending. of the inflation. And I think what.

again, and to go back to my earlier. point, I think what we're not getting. credit for here is that if we can. stabilize the budget deficit, even bring. it down, that that will contribute to. disinflation. If I think about Central. Bank credibility, no in my career, probably post-World War II, no Central. Bank had more credibility than the. Bundesbank. up until the advent of the euro, but. they controlled the.

they work with the German government and. they would work with each other hand in. hand. The Bundesbank would say, "If you give. us the fiscal control, if you give us if. you are not profligate, if you give us. a reasonable fiscal balance, we will. work with you. We will foam the runway. to allow you to decrease spending, we. will decrease interest rates. And. I think that's something we could be. doing here." I'm I'm glad that you two.

are confused by the Fed's actions, Secretary Bessant, because I read your. article and while I understand the. mandate to get to 2% inflation, why it's. 2% not three, I'm curious about your. take on that cuz I did a little. historical. archaeology. I understand somebody in. New Zealand came up with the two target. as opposed to 2.5 or 1.5 or three. Let's. put that aside for a second. The thing that I think most Americans. don't understand and the and the second. mandate, full employment, robust. employment, that seems pretty easy to.

understand for all of us. But this. qualitative qualitative easing and. how they purchase and which assets they. purchase and why seems to have a. massively distorting effect on the. economy, at least according to your. essay and and some of the other sources. you cite in this essay, which we have in. the notes for people to read. What should we be doing this qualify. this QE at all? If you had your druthers. and you could just, you know, swipe a. pen here and and clean this up,

would you just get rid of the QE portion. of what they're doing? And how do they. pick? Like how how do you pick whose. corporate debt you buy? Do you know, are. you buying Nvidias and Ubers and Googles. because those are great companies or. Microsofts or you buying, you know, Fords or struggling companies. or struggling airlines? How are those. decisions made? And should the American. people be buying those things and why? Yeah, so there's a a lot to unpack. there. That absolutely.

large-scale asset purchases should be. part of the so-called Central Bank. toolkit. But I I think if we go back and. look at COVID, which which was a real. test, the the Bank of England had the. best model. The markets became unhinged. They stepped in for a period, I can't. remember whether it was 36 or 90 days. They stabilized markets and they they. were the buyer of last resort, which is. classic theory for what a Central Bank. is supposed to do. They're supposed to.

provide. liquidity, they're supposed to open a. window where. financial institutions can pledge. collateral and do it that way. And you. know, I'll just point out that when the. bond yields were quite high, the Fed did. buy quite a bit. and they would actually have a large. profit if they stopped during during. that period. Instead, they continued on. when we were the. near near these the zero bound. And what.

what we've ended up with here is they. pushed the asset price up. The interest. rates were low. Many people couldn't buy a house during. COVID, but now the interest rate has. normalized and we're just in a much more. normal period for interest rates, but. we're not in a normal period for asset. prices because so many people still have. the 3% mortgages they have from COVID. And back back to your question on what. should the Fed buy? Traditionally,

the the Fed since large-scale asset. purchases began in 2009, they just. bought government bonds. They they. choose the duration. They switched during COVID because look, there there were estimates we're going. to have a 20, 30, 40% GDP. decrease. So, they they were buying indices of. high-yield bonds.

of corporate bonds to stabilize the. market. I think what you're alluding to, Jason, is also during that period in. conjunction with Treasury, there were bailouts and that's done by a. facility that is negotiated between the. Fed and the Treasury called a 13-3. facility. And you identify the strategic. industries that may be struggling. It. would not have behooved anyone for the. airline industry to go belly up because.

of. a virus that turned out to be quite. transitory. So, again, I I think these are emergency. powers. I think they should have them in. an emergency, but I think the duration. went on much much too long. If you're. now in the bond sales game, Secretary Bessant, I mean, you've you've. been on the other side of the market, but now you're selling the bonds. What. do you see in terms of appetite for US.

bonds? Has China disappeared or they. still selling down? Are there other. buyers emerging? And how does broader. capital markets look to US debt in this. moment? Well, it's like the John Maynard. Keynes said. a lot of a lot of economics. is a beauty pageant. You're just picking. like who do you think's going to win. And the the the US. became. the worldwide winner last year. We had.

the best performing bond market, best. performing markets since 2020. And I I. think that was for a combination of. reasons. One was the fiscal progress we. made. and everyone went from. the tick terrors, they were doomsday machine to. maybe terrors are taking us to the. promised land in terms of. fiscal paydown. And. I I also think inflation expectations.

have remained well anchored. Back to. Jason's question, why 2%? We've chosen. 2% and. I I I think. it's very difficult to do a midair. refueling or to call an audible on two. when you're above two because then it. looks like when you're above a level, you will always fudge upward. So, I I. think there is a very robust. conversation to get back.

once we are back to two, which I think. will be in sight, then we can have a. discussion, is it much smarter to have a range? Like. what what drives me crazy, the economy, the markets are biology. They're not math, they're not physics. They're they're nonlinearities, they're very complex systems, they're. mutations in the system, and this idea. that we can have this decimal point. certainty is just absurd. So, I believe.

that once we re-anchor to the target, then we could talk about a range. And we. could decide whether the range is from. 2.5 to 1.5, is it from 1 to 3? But I I. think it's very difficult to uh. re-anchor until you meet the target and. maintain credibility. Maybe as we wrap. up on the Fed, can you give us a sense.

of the candidates that are being. interviewed right now by President. Trump, Kevin Warsh, Kevin Hassett, Waller. Chris Waller and Rick Reed. >> Chris Waller, Rick Reed. How do you. think each of those will try to reshape. the Fed more in this. constrained mode. that you're advocating for? Well, I I I. think many of them have already come out. and said that they. do want to shrink it both as the. footprint of the institution in the. economy, but shrink the institution.

itself. Uh the the the Fed does not, as. we talked about earlier, the the Fed. does not rely on appropriations. The Fed. just prints its own money, and it's had. heads its own budget, and. as I talked about it in the article, it. has its own police force, it has its own. You know, we've seen the big cost. overruns at the building. here in DC. If if Treasury that we're. look looking at. new buildings for the men of the Bureau. of Engraving. If we had that kind of.

cost overrun, I can guarantee you that I. would be up in Capitol Hill getting a. the well-deserved. earful. Yeah, you'd be pilloried. Yeah. So, um. but each one of them uh. ha- has talked about uh. moving back toward the more traditional. Fed [snorts] role, moving into the just. getting the Fed back into the. background. You know, it it it wasn't. meant that.

the market and the economy and the. American people were supposed to hinge. on every word. It was supposed to be a. predictable process. Uh I I think. many many of them have talked about. getting rid of this so-called dot plot, the summary of economic projections. Uh. they've they've talked about what should. we do. uh with the regional banks. No one No. one's talking about getting rid of them. or the regional bank presidents, but. should each one of the regional banks. have a specialty, go back to a center of. excellence.

Uh what Why do we have so many. overlapping functions? Uh you know, I I. can't tell you. For For me as someone. who's an economic historian, the. interview process has been fantastic. because I I got to interview 11 of the. most knowledgeable people on economics, the Fed, monetary policy. One time I got to interview five, another time and I'll be with four of. them with the president. So, you know, I. I think I understand probably better.

than just about anybody in the country. what needs to be done. And ev- everyone. wants to. see a dem- a smaller footprint and more. predictability from what's going on. So, what happens in 2026 for Main Street? What can you. promise them? What can you not promise. them? What is out of your control? Because we talk a lot about, "Hey, the. speed limit in mortgage rates." But you. can't, in your position, correct me if.

I'm wrong, have a dramatic impact on the. supply of homes as one example. So, and so whatever you put the rates at, it. could just drive the prices of those. homes up if we lower rates too quickly, and then we have another situation like. the Great Financial Crisis where people. are overbidding. uh the the the remaining housing stock. So, what can you actually promise to the. American people will happen in 2026 on. Main Street? We know Wall Street's going. to be fine. And and these American entrepreneurs and. these companies are firing on all.

cylinders. Fantastic. Lots of. regulations taken out of the way. But what what can Main Street expect. from. the administration in 2026? Jason, two. things is one, there there's nothing I. can promise because there's always a. degree of uncertainty. Uh but one one of the things that we've. been doing here at Treasury when. we talk about loosening the financial. regulations, the. the. companies that suffered the most under.

these regulations were the small banks. So, we have seen small and community. banks disappear at an alarming rate. About half of them have disappeared. since the GFC. So, I what I can promise. is that the regulatory regime for those. banks is being loosened. and is the the saying that there's. three eight banks in the US that are too. big to fail, that the policies since the.

GFC were too small to succeed. And we are doing everything to unleash. the lending capability of these banks. Their prof- Their profitability will. enable them to be part of their. communities, to lend more. Uh. 70% I think I do the statistics, 70% of. ag lending, 30 40% of real estate lending, 40% of. small business lending are from these. Main Street lenders. So, I can tell you.

there's going to be a bigger. availability of credit. I can tell you. that we are not going to blow out the. budget deficit and cause You you will. not see an MIT study that says that the. Trump 2.0 caused inflation through the. budget deficit. And I I can also tell. you that we are working to increase. working wages. In President Trump's. first term, hourly workers did better. than supervisory workers. Bottom 50% of.

households had a better increase in net. bigger increase in net worth than the. top 10%. So, you we we are trying to level the. playing field. Secretary Mnuchin, this is a. I I would say conservative. administration. And if you look at the kind of economic. policy of of traditional conservative. administrations, you would not assume. that the administration would lead the. federal government to make large.

investments in the private industry or. to participate meaningfully in the. economy as we are seeing with some of. the deals that have been done over the. last couple of months where the the. administration has taken equity stakes. in key industries and key businesses. And also has concurrently provided. either regulatory unlock or or some sort. of. trade participation. Can you just. comment on what some people are calling. state capitalism? Is this. from your view.

a a set of strategic interest or is this. a permanent shift in how the the. government plays a role in the economy? And and and how does that make sense. from a free market perspective? David, I. think it goes back to the idea that free. pure unfettered free trade was not fair. trade. When when you have. competitors with their. Chi- China, Vietnam, some others, sometimes in in Europe. that is have high subsidies, then like.

this idea that perfect Ricardian. equivalence exist doesn't. And we can. see by these distortions that developed. the these huge capital pools that have. developed because of the imbalances. So, if that's one point, but. and that's trade policy, but on the. other side there's national security. policy. And the only good thing I can. say about COVID is it woke us up to the. national security took us out of this.

paradigm. that. elongated free-flowing the supply chains. wherever they may be were the best, that. they um. the the most smoothly functioning was. desirable. Well, it it turns out that. the most efficient is not always the. safest, the most robust, or the. soundest. And we saw that during COVID. We we discovered that the Chinese became.

unreliable suppliers. Uh India and some. of the other countries, they acted, surprise surprise, in their national. interest. So, uh what we If you look at the. industries where we are taking stakes. and moving forward, we've identified. five to eight strategic industries where. the US we have to have endogenous. production or at least adjacent to us. the in North America or this hemisphere.

Um. We and I I think of it. as it's the kind of thing that you would. have seen during World War II. And we are in an economic war, and we do not want it to become a. kinetic war, but we have to be prepared. if if it could. But when when we think. about huge amount, 80 90% of the. precursor chemicals that go into US.

pharmaceuticals are made overseas, majority they in China or India. Semiconductors. In in my life, I believe that the greatest economic. threat to the world economy, to the US. economy, more than the Arab oil embargo. that I lived through in the '70s when I. was lined up with my parents to. the at the pump to do odd even days. because. of the oil embargo, the biggest threat.

is that 97%. of the upper-level precision chip. manufacturer, the advanced chip. manufacturers is made in Taiwan and we. need to bring a portion of that back to. the US. same for steel same for shipbuilding. same for pharmaceuticals so the. interventions are all the in those. areas. Scott as we wrap I'd like to go. back to one topic you spoke about at the.

beginning. which is you've had to overcome a lot of. Biden era difficulty and a lot of the. groundwork as you said will be seen in. 26 and beyond and I just want to give. you a final moment to talk about those. in two buckets bucket number one is. there's a lot of tax cuts that will hit. starting January 1 and I think it would. be good for people to understand what's. coming and then. bucket number two there's been this. incredible movement and energy around. Trump accounts and you even spoke about.

this yesterday about the value of. compounding and teaching people the. financial literacy to understand what's. possible for all these kids and I just. want to give you a chance to talk about. those two topics as we wrap. Couple. points here what we are going to see. next year. that if you think about the the. signature parts of the the tax bill I I. think that the powerful the most. powerful parts. had. the immediate expensing for American. business. permanent for equipment.

and then. four five year window for factories so. we are seeing already seeing a capex. boom so 2025 was a capex boom I think. that is going to accelerate with all the. trade deals we've done. I was just about six weeks ago my. hometown of Charleston South Carolina. Boeing the largest employer there is. increasing their plant by 50% for the. Dreamliners. result of the trade deals but it's also.

part of the tax deal. So we're going to. continue seeing this capex boom that. turns into employment boom on the other. side for working Americans the president. I I led the. administrations team up on the hill. in terms of what was non-negotiable for. non-negotiable for the president and a. lot of. traditional Republicans didn't like his. campaign promises to working Americans.

and the president never yielded on this. and no tax on tips no tax on overtime no. tax on social security deductibility of. auto loans for American-made cars so the. the bill was done on July 4th it's. retroactive to the beginning of the year. for working Americans retroactive to. January 20th. for corporates so working Americans I I. also had the honor of being the IRS. commissioner and I can see that we're. going to have a gigantic refund year in.

the first quarter because no one changed. their working Americans did not change. their withholding so I think households. could see. depending on the the number of workers. 1000 2000 dollar refunds they will. change their withholding schedule at the. beginning of the year and they will get. an automatic increase the in real wages. so I think that's going to be a very. I think that's going to be a very. powerful combo.

corporate and individuals. And then. the. these Trump accounts I believe are a. game changer and I think this will end. up more than. what he did for defense more than he did. for strategic industries when we look. back in 50 years I think this. administration will have saved or. created the idea that everyone is an. equity owner that everyone has a stake.

in the market right now about 38% of. Americans do not own equities either. directly or through some kind of a 401k. or something so by giving every child a. thousand dollars at birth the for these. accounts we're going to increase. financial literacy we're going to. increase people's optimism in the market. here at Treasury we're going to do the a. dramatic amount of financial literacy. financial education we're going to push.

that out to the schools and I I think. this idea of every American learning. that money can make money for them that. it we we will close the gap over time. we'll go from 38% not owning equities. that if this continues hopefully that. can be zero and everybody gets a stake. in American prosperity. that the American innovation that you. all do and I I think it is going to when.

I look at sort of the the polling for. young people in terms of their view of. socialism their their view of capitalism. I I think that this is going to make. every man you Huey Long said every man a. king I think this is going to make. the every. man and woman. a a market participant and I think it's. fantastic it. I began the announcement the other day I. said I've talked about parallel.

prosperity Wall Street and Main Street. this is the biggest merger in history. because it is merging Main Street and. Wall Street and I I grew up in a small. town in South Carolina. the only thing I knew about Wall Street. was something bad had happened in 1929. and you know I was fortunate went to. Yale and then. went to New York but you shouldn't have. to have that path that if you want to. stay in your hometown but participate in. the market and learn a lot about it this.

is the ultimate program for that and. what we're doing is. parents family members employers can add. five thousand dollars philanthropist. like Susan Michael Dell. are going to put in 6.25 billion dollars. to top up the accounts and then we're up. to probably 20 states that are going to. also top up the accounts employers. we've got credit card companies banks.

that are already on board and you're. just going to keep pushing more money. into these accounts Americans are the. most generous people in the history of. the world we have never had a direct way. to get rid of the friction of. philanthropy and give money directly to. American children. Yeah. Fantastic on that note it's a real. watershed moment Secretary Bessent we. appreciate your leadership and your. service and for spending the time with. us here today you've been open and.

articulate as always and we thank you. for that we appreciate it. For Chamath. Jason this is the the All-In podcast and. thank you Secretary Bessent. Good well. it's an honor to serve the American. people so thank you all. >> [music]. >> I'm going [music]. all in.