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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Scotte Besson's of K Square Group joins us around the

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Speaker 2: table for more. Why do you consider to be a

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Speaker 2: potential Treasury Secretary? Pick Scock And morning, sir, good morning,

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Speaker 2: thanks for coming in. Thank you very much for being

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Speaker 2: with us. Let's stop with an easy one. Why do

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Speaker 2: you think that one is a bad idea? We're capital

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Speaker 2: gains tax? Well, the capital gains tax. Look, Kamala Harris

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Speaker 2: is an economic illiterate. Donald Trump is going to give

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Speaker 2: an extensive speech at the Economic Club of New York today.

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Speaker 2: He's going to take questions. She's reading from a teleprompter,

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Speaker 2: and you know, let's just review here.

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Speaker 3: The capital gains tax will be after a proposed tax

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Speaker 3: on unrealized capital gains, which, in the scheme of the

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Speaker 3: new taxes, has to be one of the worst tax

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Speaker 3: ideas in thirty years.

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Speaker 2: Let's talk about how the former president, perhaps future president

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Speaker 2: might count to that. What are his policies.

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Speaker 3: Well, I think you're going to hear from President Trump today.

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Speaker 3: You are going to hear you a warning that the

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Speaker 3: Harris Biden administration caused a great inflation. Vice President Harris

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Speaker 3: was the tiebreaking vote on both spending bills that led

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Speaker 3: to the inflation, the inappropriately named Inflation Reduction Act and

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Speaker 3: the American Rescue Plan. They would not have passed without

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Speaker 3: her signatures. I'm still not sure that she knew what

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Speaker 3: she signed, but she did sign it. And you know,

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Speaker 3: all these policies that she's talking about now, you know,

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Speaker 3: are going to ignite inflation again because what happened last

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Speaker 3: time was we got a demand shock from government spending

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Speaker 3: that was met with high levels of regulation, and that's

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Speaker 3: the recipe for inflation. And Trump one point zero. We

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Speaker 3: got a demand shock from the private sector, fueled by

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Speaker 3: the tax cuts, and that was met with deregulation, and

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Speaker 3: that's why we had non inflationary growth. President Trump's going

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Speaker 3: to talk about that. He's going to talk about energy dominance.

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Speaker 3: He's going to talk about not only stopping the inflation rate,

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Speaker 3: but getting prices down, which I think is very important

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Speaker 3: for the American household. You know, we're in an affordability crisis,

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Speaker 3: and he's going to address getting the deficit down. I mean,

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Speaker 3: we are at seven percent peacetime non recessionary deficits. And

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Speaker 3: it is clear now, you know, I think I said

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Speaker 3: it last time. When I was here. I've been saying

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Speaker 3: it for about two months that the economy is slowing dramatically.

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Speaker 4: Scott, how do you get the deficit down when if

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Speaker 4: you look at Trump's policy proposals floating a corporate tax

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Speaker 4: rate of fifteen percent, campaign is also excluding Social Security

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Speaker 4: payments from taxes, exempting tax on tipped wages, also increasing

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Speaker 4: the child tax credit. All of this is going to

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Speaker 4: add to the deficit plus Travis with Some economists will

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Speaker 4: say is inflationary.

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Speaker 3: Well, let's unpack that there there would be income from

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Speaker 3: the tariffs, so that's a big number.

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Speaker 4: Well, that's debatable though, that's just going to be passed

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Speaker 4: on to consumers.

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Speaker 3: Well, all taxes that are passed on the consumers. And

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Speaker 3: I think what's interesting about taxes is they aren't necessarily inflationary.

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Speaker 3: They're one time administrative price adjustment. Historically forty to fifty

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Speaker 3: percent of any upward enmpulse is reflected in the currency.

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Speaker 3: So that would all set it. Then we have the

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Speaker 3: various preferences by consumers. It could end up in foreign manufacturers' margins.

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Speaker 3: Their margins could go down, so and you know their elasticities.

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Speaker 3: Consumer behavior can change, but in terms of getting the

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Speaker 3: death sit down. I have been talking about it before.

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Speaker 3: I think we would freeze domestic programs except for defense.

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Speaker 3: If you look at the Paris Biden proposals, and she

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Speaker 3: hasn't walked this back yet, maybe she will. They're calling

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Speaker 3: for a twenty one percent decrease in defense spending. I

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Speaker 3: can't imagine a worse time to do it. The only

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Speaker 3: thing that I believe, and again I don't speak for

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Speaker 3: the campaign, but the only thing that I believe that

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Speaker 3: should have a real increases is defense. The Inflation Reduction

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Speaker 3: Act is the doomsday machine for the deficits. It was

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Speaker 3: originally scored at a positive score. It was supposed to

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Speaker 3: be positive fifty billion, then it went to three hundred billion.

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Speaker 3: It's probably going to be a trillion this year, and

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Speaker 3: it's now estimated over the life of this thing that

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Speaker 3: it could be a four and a half trillion hole

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Speaker 3: in the deficits.

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Speaker 1: So hold on a second. Does that mean that you

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Speaker 1: expect Donald Trump to try to unwind it, put a

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Speaker 1: halt to it, okay, but not unwinded.

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Speaker 3: Well, I'm not sure what unwine means. I mean, you're

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Speaker 3: not going to level the eight charging stations that we

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Speaker 3: got for eight billion dollars.

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Speaker 1: I guess here's the question, and this is the reason

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Speaker 1: why you had the Congressional Budget Office come out saying

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Speaker 1: that Donald Trump's proposals will actually increase the deficit more

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Speaker 1: than Kamala Harris's. We had a story on Bloomberg talking

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Speaker 1: about how potentially Donald Trump's proposal could increase the collective

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Speaker 1: costs as much as a ten and a half trillion

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Speaker 1: dollars over the next decade. I mean, how do you

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Speaker 1: offset that?

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Speaker 3: Well, first of all, and you all know that Bloomberg

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Speaker 3: is one of my favorite venues. But I do have

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Speaker 3: to say that that story yesterday in the ten and

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Speaker 3: a half Trillion was poorly written, poorly edited, and compared

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Speaker 3: apple st oranges. The ten and a half trillion was

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Speaker 3: everything Donald Trump and Jade Evance have ever said, and

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Speaker 3: they took it to the highest end. Then they took

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Speaker 3: a score from the Wharton School and said, well, this

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Speaker 3: is the Harris budget or the Biden Harris budget. It's

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Speaker 3: apples and oranges. If we were to take everything the

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Speaker 3: Vice President Harris, including what she said in Raleigh, twenty

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Speaker 3: five thousand dollars or twenty five thousand dollars for housing,

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Speaker 3: including for new arrivals, that would be substantially in excess.

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Speaker 4: But the Democrats and Biden's budget now and Kamala Harris

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Speaker 4: is part of the administration, have revenue increases. Where are

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Speaker 4: the revenue increases to offset all of these tax cuts

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Speaker 4: that Trump is talking about.

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Speaker 3: Well, look, I think they are paid for us here.

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Speaker 3: So it's the cut spending. We do not have emory.

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Speaker 3: We do not have a revenue problem in this country.

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Speaker 3: We have a spending problem. So traditionally the government revenues,

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Speaker 3: federal government revenues are seventeen and a half to nineteen

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Speaker 3: percent of GDP. We're right there now. Since two thousand,

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Speaker 3: we've averaged about a three percent budget deficits, so spending

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Speaker 3: has been twenty one twenty two percent. This administration, led

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Speaker 3: by Vice President Harris, has blown out the spending. We're

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Speaker 3: at a seven percent budget deficit right now. And what

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Speaker 3: do we have to show for it. We had job

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Speaker 3: we had the employment numbers revised down by eight hundred

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Speaker 3: or nine hundred thousand jobs. We had two hundred and

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Speaker 3: fifty thousand private sector jobs. So the idea here is

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Speaker 3: what we have seen with Paris Biden. It's what's called

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Speaker 3: in Grand Prix driving two footed driving. You've got one

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Speaker 3: foot on the accelerator, the FED is putting one foot

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Speaker 3: on the brake.

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Speaker 2: Scot, forgive me because I've got ten seconds left that

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Speaker 2: I don't want to cut you off, So just stick around.

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Speaker 2: Scott Besson's of Keysquak Group from New York. This is Bloomberg.

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Speaker 2: Typically we talked to Scott beston a Keysquak group a

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Speaker 2: lot about politics, given his potential to be the next

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Speaker 2: Treasury secretary. Score We've also got to talk about what's

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Speaker 2: happening in this market because you've got positions in it.

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Speaker 2: I know that you've been long Gold, You've been long

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Speaker 2: the Japanese yen. Are you keeping those positions?

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Speaker 3: I am, and thanks for focusing on my day job.

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Speaker 3: You know, I think in the Japanese yen it's an

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Speaker 3: extraordinary opportunity because as central banks around the rest of

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Speaker 3: the world are an easing cycle, Japan for the first

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Speaker 3: time in almost two decades, is in a hiking cycle.

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Speaker 3: So you know, we'll see if they're like sokatas they

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Speaker 3: only come out once every seventeen years, or whether this

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Speaker 3: turns into a real hiking cycle. My thought is that

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Speaker 3: there is the potential for this to keep going, So.

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Speaker 2: You want to keep riding this trade. We're at one

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Speaker 2: forty now, we were pushing through one sixty previously. What

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Speaker 2: kind of numbers have you got in mind? Well, it's

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Speaker 2: two sides to this.

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Speaker 3: Japan is strengthening inflationary impulses picking up. The other side is,

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Speaker 3: as I've said, the US. I believe the US economy,

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Speaker 3: I said it recently is buckling, and we're starting to

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Speaker 3: see it in the numbers. I think we're going to

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Speaker 3: it's both industrial numbers and labor. And I think what's

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Speaker 3: funny here on the Democratic side of the aisle, and

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Speaker 3: I will put politics back in for a minute. They've

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Speaker 3: been screaming for a rate cut all year now. You know,

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Speaker 3: even Claudia sam who's been chewing off her arms since

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Speaker 3: February for a rate cut, doesn't want to come out

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Speaker 3: and say, well, my rule got triggered. And anytime my

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Speaker 3: rule gets triggered, we're in a recession. So they don't

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Speaker 3: want to use the R word before November fifth.

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Speaker 2: So the longdon Nippon steel way, it's the cheaper this

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Speaker 2: still gets right essentially for them?

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Speaker 3: Well, yes, exactly is they may have, through some terrible

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Speaker 3: timing get a better price. We'll see what happens.

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Speaker 2: Wak me through what you think should happen, and let's

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Speaker 2: finish there. Harris says she wants to block the deal.

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Speaker 2: Ban is given the signal he wants to block the

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Speaker 2: deal the form of price, and it's given us the

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Speaker 2: second he wants to block the deal. The company has

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Speaker 2: come out to the Wall Street Journal in the last

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Speaker 2: twenty four ans and say, if you block the deal,

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Speaker 2: job losses are on the table. We're going to be

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Speaker 2: moving out of Pittsburgh. How do you recalibrate the policy

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Speaker 2: now with that in mind.

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Speaker 3: Well, I think we've seen and it was very surprising

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Speaker 3: because I've been going to Japan since nineteen eighty nine

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Speaker 3: and Japanese companies traditionally have a very high regard for

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Speaker 3: all stakeholders. I remember the first time I went and

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Speaker 3: you talking about shareholder value and they said, oh, no,

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Speaker 3: you know, Bess and Son. We have our customers, we

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Speaker 3: have our employees, we have our banks, we have our community,

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Speaker 3: and the shareholders are last. And now you know, they

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Speaker 3: reverse that. They're putting shareholders first. And I was surprised

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Speaker 3: to see a Japanese company that didn't check in with

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Speaker 3: the US stakeholders. They didn't check in with the community,

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Speaker 3: they didn't check in with the unions, they didn't check

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Speaker 3: in with the customer.

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Speaker 2: That's the mistake the mascot. And this is where we are.

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Speaker 2: And now we've got to deal with the police. See

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Speaker 2: on the campaign trail. Are we going to offer them

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Speaker 2: state aid? How do we keep this company in business

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Speaker 2: in a way that doesn't end up with job losses?

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Speaker 3: Well, look, I think that the you know, maybe the

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Speaker 3: deal will be resurrected. Cleveland Clips actually forced Nippon Steel's

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Speaker 3: hand with their bids, so maybe a domestic buyer will

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Speaker 3: come back.

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Speaker 2: You don't see space for state aid. Sorry, you don't

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Speaker 2: see space for state eight.

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Speaker 3: Well, I don't see why we need it right now

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Speaker 3: is what we did state aid with Intel, and Intel

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Speaker 3: just laid off fifteen thousand employees. The stocks down sixty

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Speaker 3: percent this year, and they're probably going to be pushed

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Speaker 3: out of the Dow.

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Speaker 2: They got their own problems. Scott, it's good to see you.

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Speaker 2: It's nice to touch on markets too. Yeah, let's do

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Speaker 2: that again next time I go into a key Square group.

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Speaker 2: We like your day job. Too, Thank you, sir,