1 00:00:02,520 --> 00:00:10,119 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the 2 00:00:10,119 --> 00:00:13,880 Speaker 1: Bloomberg Balance of Power podcast. Catch us live weekdays at 3 00:00:13,920 --> 00:00:17,119 Speaker 1: noon and five pm Eastern on Apple Coarckley and Android 4 00:00:17,160 --> 00:00:20,520 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 5 00:00:20,600 --> 00:00:24,440 Speaker 1: you get your podcasts, or watch us live on YouTube. 6 00:00:25,560 --> 00:00:29,600 Speaker 2: Listening to live testimony of Scott Bessen's President Elect Trumps 7 00:00:29,600 --> 00:00:32,839 Speaker 2: selection to run the Treasury Department. A familiar voice here 8 00:00:32,880 --> 00:00:35,239 Speaker 2: on Bloomberg TV and radio. As we've spent time with 9 00:00:35,560 --> 00:00:37,920 Speaker 2: mister Bess and you're at this table on Balance of Power, 10 00:00:37,920 --> 00:00:39,720 Speaker 2: and of course you've seen him on other programs. It 11 00:00:39,760 --> 00:00:43,840 Speaker 2: is expected he will be confirmed. I'm Joe Matthew alongside 12 00:00:43,920 --> 00:00:46,280 Speaker 2: Kaylee Lions in Washington. Thanks for being with us here 13 00:00:46,640 --> 00:00:49,280 Speaker 2: as we continue our coverage of the confirmation hearing throughout 14 00:00:49,280 --> 00:00:51,360 Speaker 2: this week, all leading up of course to the inauguration 15 00:00:51,479 --> 00:00:53,960 Speaker 2: of Donald Trump on Monday, and we'll have special coverage 16 00:00:54,120 --> 00:00:56,840 Speaker 2: for you then. Kaylee Lyons interesting Scott Besson going at 17 00:00:56,880 --> 00:01:00,640 Speaker 2: it with Democrats and Republicans. Not terribly controver Ruschel today. 18 00:01:00,640 --> 00:01:02,960 Speaker 2: There were some questions about taxes. There were some questions 19 00:01:03,000 --> 00:01:06,280 Speaker 2: of course about tariffs. The implications when it comes to 20 00:01:06,319 --> 00:01:08,720 Speaker 2: inflation and the FED. But this would be one of 21 00:01:08,800 --> 00:01:11,120 Speaker 2: the easier walks for I think we can say Donald 22 00:01:11,160 --> 00:01:12,720 Speaker 2: Trump's nominees absolutely. 23 00:01:12,760 --> 00:01:16,160 Speaker 3: Scott Besstt widely seen by frankly people on both sides 24 00:01:16,160 --> 00:01:18,920 Speaker 3: of the aisle as a qualified candidate to be Treasury Secretary. 25 00:01:19,000 --> 00:01:21,319 Speaker 3: This hearing was not likely to make or break his 26 00:01:21,400 --> 00:01:24,640 Speaker 3: confirmation prospects, as it was expected that he would be 27 00:01:25,160 --> 00:01:28,039 Speaker 3: confirmed pretty easily prior to him giving answers to the 28 00:01:28,080 --> 00:01:30,920 Speaker 3: many questions that these twenty seven senators asked of him today. 29 00:01:30,920 --> 00:01:33,720 Speaker 3: But yes, it did focus primarily on the two tees, 30 00:01:33,800 --> 00:01:36,360 Speaker 3: taxes and tariffs. He talked about how he would be 31 00:01:36,480 --> 00:01:38,920 Speaker 3: it as an economic crisis if the tax cuts of 32 00:01:39,000 --> 00:01:41,800 Speaker 3: twenty seventeen were allowed to expire. He kind of pushed 33 00:01:41,840 --> 00:01:43,920 Speaker 3: back on the idea that tariffs were going to translate 34 00:01:44,280 --> 00:01:47,360 Speaker 3: into higher prices for Americans and interesting, when pressed by 35 00:01:47,480 --> 00:01:51,680 Speaker 3: Democratic Senator Elizabeth Warren on the debt ceiling, suggested that, well, 36 00:01:51,720 --> 00:01:53,720 Speaker 3: he wants to do a market survey. He's not really 37 00:01:53,800 --> 00:01:55,559 Speaker 3: sure what the best path forward on the debt ceiling 38 00:01:55,600 --> 00:01:57,640 Speaker 3: would be. If Donald Trump were to tell him he 39 00:01:57,760 --> 00:02:00,120 Speaker 3: wants the debt ceiling repealed, so he said he'd work 40 00:02:00,120 --> 00:02:00,720 Speaker 3: with him to do it. 41 00:02:00,680 --> 00:02:04,080 Speaker 2: It's clearly there to enact the Trump agenda. It's interesting, 42 00:02:04,080 --> 00:02:06,040 Speaker 2: I'll tell you a lot of these conversations sound a 43 00:02:06,040 --> 00:02:08,320 Speaker 2: lot like the ones that we had with Scott Besson 44 00:02:08,440 --> 00:02:11,520 Speaker 2: before he was attapped to be secretary, because we had 45 00:02:11,520 --> 00:02:13,400 Speaker 2: many of the same questions when it came to taxes 46 00:02:13,440 --> 00:02:17,400 Speaker 2: and tariffs. The line that endures extending the Trump tax 47 00:02:17,440 --> 00:02:20,480 Speaker 2: cuts is quote, the single most important economic issue in 48 00:02:20,520 --> 00:02:21,280 Speaker 2: the US today. 49 00:02:21,919 --> 00:02:23,600 Speaker 3: And on that note, we want to turn to someone 50 00:02:23,600 --> 00:02:26,440 Speaker 3: who we also have had many conversations with about taxes 51 00:02:26,480 --> 00:02:28,680 Speaker 3: and tariffs. Joe Lavornia is joining us now here on 52 00:02:28,720 --> 00:02:30,960 Speaker 3: balance of Power. He's former chief economist at the National 53 00:02:31,040 --> 00:02:34,520 Speaker 3: Economic Council during the first Donald Trump administration and is 54 00:02:34,520 --> 00:02:38,799 Speaker 3: now managing director and chief Economists for SMBC Neco Securities America. 55 00:02:38,880 --> 00:02:42,519 Speaker 3: Welcome back to Bloomberg, Joe. That was obviously a lengthy 56 00:02:42,960 --> 00:02:46,400 Speaker 3: testimony from Scott Besson. Overall, do you think he did 57 00:02:46,440 --> 00:02:48,680 Speaker 3: a good job pleading his case or did he leave 58 00:02:48,720 --> 00:02:49,920 Speaker 3: you with some questions? 59 00:02:50,520 --> 00:02:52,799 Speaker 4: No, no questions. He did a phenomenal job. I knew 60 00:02:52,800 --> 00:02:54,120 Speaker 4: he was going to do a great job and it 61 00:02:54,160 --> 00:02:57,960 Speaker 4: speaks to just his qualifications in the fact he's extraordinarily 62 00:02:57,960 --> 00:03:01,079 Speaker 4: thoughtful in all of his answers. I thought it was fantastic. 63 00:03:02,639 --> 00:03:05,200 Speaker 2: So what extent, Joe, I'm curious your thoughts on this, 64 00:03:05,840 --> 00:03:08,160 Speaker 2: because we've talked about this, and we talked about the 65 00:03:08,240 --> 00:03:11,600 Speaker 2: job before Scott Besstt was selected. To what extent is 66 00:03:11,600 --> 00:03:14,280 Speaker 2: it his job? And you could really apply this to 67 00:03:14,360 --> 00:03:18,000 Speaker 2: any of the nominees to enact the Trump agenda, to 68 00:03:18,160 --> 00:03:20,880 Speaker 2: do what Donald Trump says, or is he there to 69 00:03:21,000 --> 00:03:23,760 Speaker 2: advise the president and say no when he needs to? 70 00:03:25,320 --> 00:03:29,320 Speaker 4: Well no, I mean the job you're serving at the 71 00:03:29,320 --> 00:03:33,239 Speaker 4: pleasure of the president, and all the cabinet nominees are 72 00:03:33,240 --> 00:03:36,920 Speaker 4: going to be responsible for implementing President Trump's visions for 73 00:03:37,080 --> 00:03:40,400 Speaker 4: which he got elected for. Certainly, there are options, and 74 00:03:40,440 --> 00:03:42,880 Speaker 4: my experience has been that when you talk to the president, 75 00:03:42,920 --> 00:03:45,880 Speaker 4: you will give you your maybe your top option, maybe 76 00:03:45,880 --> 00:03:48,440 Speaker 4: your second option, and maybe the third option, which let's 77 00:03:48,440 --> 00:03:52,160 Speaker 4: say even will be suboptimal, but that it is an option, 78 00:03:52,480 --> 00:03:54,960 Speaker 4: and then the president decides and then you implement that agenda. 79 00:03:55,080 --> 00:04:00,480 Speaker 4: So you are there an advisory counseling way, and again 80 00:04:00,800 --> 00:04:02,880 Speaker 4: you're working for the president. You want to put his agenda, 81 00:04:02,960 --> 00:04:05,119 Speaker 4: and it seems to me that this time around, having 82 00:04:05,240 --> 00:04:07,600 Speaker 4: had a lot of experience having done this once before, 83 00:04:07,640 --> 00:04:10,840 Speaker 4: President Trump clearly has the people that have his vision 84 00:04:10,880 --> 00:04:12,880 Speaker 4: and can best implement such policies. 85 00:04:14,160 --> 00:04:14,640 Speaker 1: And if that. 86 00:04:14,720 --> 00:04:18,160 Speaker 3: Vision were to include a renewed push to repeal the 87 00:04:18,200 --> 00:04:22,279 Speaker 3: debt ceiling entirely, Joe, if you were in Scott Scott 88 00:04:22,320 --> 00:04:25,000 Speaker 3: Best and Shoes are still advising Donald Trump in the 89 00:04:25,040 --> 00:04:28,159 Speaker 3: second administration, what would you think about pursuing that kind 90 00:04:28,440 --> 00:04:30,560 Speaker 3: of policy of removing what is supposed to be a 91 00:04:30,760 --> 00:04:32,640 Speaker 3: check on fiscal impulses. 92 00:04:33,440 --> 00:04:36,040 Speaker 4: Yeah, the thing is that it hasn't been a check 93 00:04:36,120 --> 00:04:40,000 Speaker 4: on these Cisco impulses. We've gone through countless dozens of 94 00:04:40,040 --> 00:04:43,000 Speaker 4: different debt ceiling scenarios. And maybe it depends whoever is 95 00:04:43,000 --> 00:04:45,200 Speaker 4: in power, but there are plenty of prominent Democrats that 96 00:04:45,240 --> 00:04:48,200 Speaker 4: in the past have said this debt ceiling is silly, 97 00:04:48,240 --> 00:04:50,720 Speaker 4: we should get rid of it. And maybe that's what 98 00:04:50,760 --> 00:04:53,080 Speaker 4: we should do. I don't know. I mean, ultimately the 99 00:04:53,120 --> 00:04:56,200 Speaker 4: debt ceiling gets increased, then we just have a bunch 100 00:04:56,200 --> 00:04:59,000 Speaker 4: of market this location that doesn't serve anybody's interest, but 101 00:04:59,040 --> 00:05:02,520 Speaker 4: it gets past again increased. So President Trump wants to 102 00:05:02,520 --> 00:05:04,480 Speaker 4: get rid of the death ceiling limit then so bit 103 00:05:04,560 --> 00:05:06,680 Speaker 4: it has to go through Congress. But I don't think 104 00:05:06,720 --> 00:05:09,400 Speaker 4: the debt ceiling at this point has done much of anything, 105 00:05:09,440 --> 00:05:12,320 Speaker 4: just has been a distraction for bigger fiscal issues, which 106 00:05:12,360 --> 00:05:14,039 Speaker 4: clearly we have to deal with given how big the 107 00:05:14,080 --> 00:05:14,800 Speaker 4: deficits are. 108 00:05:15,960 --> 00:05:18,560 Speaker 2: It's interesting We talked to Miami Guinness about this recently. She, 109 00:05:18,720 --> 00:05:21,480 Speaker 2: like some lawmakers, would say Joe that at least it's 110 00:05:21,520 --> 00:05:23,760 Speaker 2: a it's a chance to stop and think it's a 111 00:05:24,200 --> 00:05:25,960 Speaker 2: speed limit. It gives you, it's a rest stop and 112 00:05:26,000 --> 00:05:27,640 Speaker 2: say are we sure we want to do this? And 113 00:05:27,680 --> 00:05:30,720 Speaker 2: we kind of recalibrate. Maybe there'll be some coverage of 114 00:05:30,720 --> 00:05:32,719 Speaker 2: what our debt levels around and it gets people thinking 115 00:05:32,760 --> 00:05:35,679 Speaker 2: about it. Is that reminder the most. 116 00:05:35,520 --> 00:05:39,960 Speaker 4: Important No, because we're one twenty No, because we're one 117 00:05:40,000 --> 00:05:42,880 Speaker 4: twenty debt to GDP and we ran and the current 118 00:05:42,920 --> 00:05:45,880 Speaker 4: administration we ran nearly a seven percent budget deficit to 119 00:05:45,920 --> 00:05:49,000 Speaker 4: GDP with full employment. So what is that debt ceiling 120 00:05:49,000 --> 00:05:52,040 Speaker 4: given us? Or give a stop to think just well, 121 00:05:52,080 --> 00:05:54,719 Speaker 4: we're yeah, oh you said that, but I mean to me, 122 00:05:54,760 --> 00:05:57,920 Speaker 4: it's not effective in dealing with bigger issues. But again, 123 00:05:58,000 --> 00:05:59,960 Speaker 4: they'll be the President of elects decision whether he want 124 00:06:00,000 --> 00:06:02,479 Speaker 4: wants to pursue that. More importantly is where we could 125 00:06:02,480 --> 00:06:06,600 Speaker 4: figure out ways to raise revenue, and even more importantly, 126 00:06:06,640 --> 00:06:08,760 Speaker 4: because revenues have been right in line with their long 127 00:06:08,800 --> 00:06:10,880 Speaker 4: term average, but figure out ways that we could get 128 00:06:10,960 --> 00:06:13,640 Speaker 4: rid of some of this waste, abuse and fraud in 129 00:06:13,680 --> 00:06:15,839 Speaker 4: the system, which, by the way, the GAO, the Government 130 00:06:15,839 --> 00:06:19,640 Speaker 4: Accountability Office, the Congressional watchdog. You can look at recent studies, 131 00:06:19,640 --> 00:06:21,839 Speaker 4: there's hundreds of billions of dollars we could save. So 132 00:06:21,839 --> 00:06:24,920 Speaker 4: I'm optimistic that there are going to be some meaningful 133 00:06:24,960 --> 00:06:27,960 Speaker 4: proposals on the spending side that actually could help at 134 00:06:28,040 --> 00:06:30,400 Speaker 4: least stabilize this and get us down to where Scott 135 00:06:30,400 --> 00:06:33,440 Speaker 4: wants to see budget devisits the GDP around three percent. 136 00:06:33,480 --> 00:06:36,440 Speaker 4: That to me is very doable well. 137 00:06:36,279 --> 00:06:39,080 Speaker 3: And he reiterated repeatedly throughout this hearing that he views 138 00:06:39,080 --> 00:06:41,919 Speaker 3: the United States as not having a revenue problem but 139 00:06:42,080 --> 00:06:44,919 Speaker 3: having a spending problem. But Joe, to what extent should 140 00:06:44,920 --> 00:06:47,560 Speaker 3: we be worried about what would happen economically if there 141 00:06:47,600 --> 00:06:51,920 Speaker 3: were to be a materially large pullback in government spending. 142 00:06:51,920 --> 00:06:53,760 Speaker 3: When you have the likes of Elon Musk and vivik 143 00:06:53,839 --> 00:06:57,280 Speaker 3: Ramaswami quoting figures in the trillions of dollars. Whether or 144 00:06:57,279 --> 00:06:59,720 Speaker 3: not that's realistic, well. 145 00:06:59,680 --> 00:07:02,880 Speaker 4: Remember trillions of dollars, it's just huge money scaling over 146 00:07:02,920 --> 00:07:07,000 Speaker 4: a ten year period. The fact look, the last private 147 00:07:07,000 --> 00:07:09,920 Speaker 4: GDP has been growing pretty strongly near three percent, but 148 00:07:10,120 --> 00:07:14,080 Speaker 4: government spending is growing even faster. If we lower government spending, 149 00:07:14,200 --> 00:07:18,200 Speaker 4: forwardlooking financial markets will react very positively. Equity markets will 150 00:07:18,200 --> 00:07:20,760 Speaker 4: go up, more capital be available, they'll be less crowding out, 151 00:07:20,800 --> 00:07:23,280 Speaker 4: which means interest rates can fall. So if there's a 152 00:07:23,320 --> 00:07:26,960 Speaker 4: period of time under which there is some friction as 153 00:07:27,000 --> 00:07:29,679 Speaker 4: we cut spending and maybe lay some of these workers 154 00:07:29,720 --> 00:07:32,280 Speaker 4: off government workers, which Elon Musk had mentioned, that they 155 00:07:32,320 --> 00:07:35,440 Speaker 4: would get large, pretty general severance. Whether that's sure and 156 00:07:35,480 --> 00:07:37,920 Speaker 4: I don't know, but the point is the markets would 157 00:07:38,120 --> 00:07:41,360 Speaker 4: like anything that gets us closer to some sort of 158 00:07:41,360 --> 00:07:44,239 Speaker 4: fiscal stability after these massive depths that we've been running 159 00:07:44,240 --> 00:07:47,080 Speaker 4: the last couple of years will be a huge positive. 160 00:07:47,600 --> 00:07:50,920 Speaker 4: And if that comes as measure GDP being slightly softer 161 00:07:51,000 --> 00:07:53,160 Speaker 4: for a period of time, even if that is the case, 162 00:07:53,240 --> 00:07:55,000 Speaker 4: that to me is a very good trade off. 163 00:07:56,080 --> 00:07:57,640 Speaker 2: Joe, I hate to say we're out of time. I've 164 00:07:57,640 --> 00:08:00,000 Speaker 2: got less than a minute. When you were at the NEEC, though, 165 00:08:00,000 --> 00:08:01,560 Speaker 2: what would it have been like that have Elon Musk 166 00:08:01,600 --> 00:08:04,280 Speaker 2: down the hall breathing down your neck on spending? Would 167 00:08:04,280 --> 00:08:05,120 Speaker 2: that have been productive? 168 00:08:06,440 --> 00:08:09,160 Speaker 4: That had been pretty cool? Because he's very innovative. I mean, 169 00:08:09,360 --> 00:08:12,080 Speaker 4: I mean, the guy is just got is it incredible, 170 00:08:12,240 --> 00:08:15,680 Speaker 4: credible entrepreneur among many things. I mean he's bringing, I think, 171 00:08:15,680 --> 00:08:21,240 Speaker 4: with Savekram Maslamia, clearly a fresher, thoughtful approach to try 172 00:08:21,280 --> 00:08:23,680 Speaker 4: to get some of these spending cuts through. And as 173 00:08:23,720 --> 00:08:27,560 Speaker 4: I've argued before, a lot of this to me is bipartisan. 174 00:08:27,600 --> 00:08:29,040 Speaker 4: We look at the Defense bill and you look at 175 00:08:29,040 --> 00:08:31,480 Speaker 4: how we do propurement. We waste a lot of money. 176 00:08:31,520 --> 00:08:33,200 Speaker 4: If we fix that, more money we could use for 177 00:08:33,280 --> 00:08:34,000 Speaker 4: other things. 178 00:08:34,840 --> 00:08:36,360 Speaker 2: Come talk to us when we have more time, Joe, 179 00:08:36,400 --> 00:08:38,640 Speaker 2: It's always great to spend time with Joelavarney. We appreciate 180 00:08:38,640 --> 00:08:41,160 Speaker 2: it very much. In the Clutch off the testimony from 181 00:08:41,200 --> 00:08:45,880 Speaker 2: Scott Besst SMBC Nico Securities America, I'm Joe Matthew alongside 182 00:08:45,920 --> 00:08:48,080 Speaker 2: Kaylee Lines. We'll see you back here at five pm 183 00:08:48,120 --> 00:08:55,560 Speaker 2: on Balance of Power on Bloomberg. Thanks for listening to 184 00:08:55,600 --> 00:08:59,000 Speaker 2: the Balance of Power podcast. Make sure to subscribe if 185 00:08:59,000 --> 00:09:02,559 Speaker 2: you haven't already, Apple, Spotify, or wherever you get your podcasts, 186 00:09:03,000 --> 00:09:05,480 Speaker 2: and you can find us live every weekday from Washington, 187 00:09:05,559 --> 00:09:08,600 Speaker 2: DC at noontime Eastern at Bloomberg dot com.