WEBVTT - Bloomberg Wall Street Week - November 29th, 2024 0:00:04.280 --> 0:00:08.480 This is Bloomberg Wall Street Week with David Weston from 0:00:08.600 --> 0:00:09.560 Bloomberg Radio. 0:00:13.280 --> 0:00:16.480 This is Wall Street Week. I'm David Weston, bringing you 0:00:16.760 --> 0:00:21.440 stories of capitalism this week, reconciliation, what's needed to make 0:00:21.440 --> 0:00:24.759 the tough decisions surrounding the national debt, and a look 0:00:24.760 --> 0:00:28.880 at one of Wall Street's passion assets. We talk with collectors, advisors, 0:00:28.880 --> 0:00:32.720 and auctioneers about the big business of fine art, but 0:00:32.800 --> 0:00:36.479 we start with a story about demand, specifically the demand 0:00:36.600 --> 0:00:40.080 for artificial intelligence. We know it will be big, and 0:00:40.120 --> 0:00:43.280 that means we're going to need massive computing power from 0:00:43.360 --> 0:00:47.520 data centers, and lots of them. 0:00:47.560 --> 0:00:50.839 When you see the world's leading technology companies who are 0:00:50.840 --> 0:00:53.720 as close to this as anybody, making the scale of 0:00:53.760 --> 0:00:57.680 investments that they are, to me, that's an extraordinary sign 0:00:57.840 --> 0:00:59.880 of the potential that they see in the future. 0:01:00.440 --> 0:01:03.280 Eric Schwartz is CEO of cyrus I, one of the 0:01:03.400 --> 0:01:07.040 largest data center owners and operators in the world. Schwartz 0:01:07.120 --> 0:01:09.679 is at the forefront of a modern gold rush as 0:01:09.760 --> 0:01:13.280 big tech companies scramble for the resources to turn electricity 0:01:13.560 --> 0:01:16.760 into computing power. We wanted to see for ourselves what 0:01:16.800 --> 0:01:19.600 the building blocks of the AI boom looked like. And 0:01:19.680 --> 0:01:22.200 so we traveled to Texas, a state with one of 0:01:22.200 --> 0:01:24.880 the highest numbers of data centers in the United States. 0:01:25.400 --> 0:01:27.959 In a suburb north of Dallas, we met with Schwartz 0:01:28.000 --> 0:01:31.080 at one of his firm's new facilities. It spans nearly 0:01:31.160 --> 0:01:35.720 a million square feet. We toured the massive, high ceiling 0:01:35.760 --> 0:01:39.560 building filled with row upon row of black cabinets shielding 0:01:39.680 --> 0:01:42.760 racks of computers from prying eyes, all of which are 0:01:42.760 --> 0:01:45.560 built a meter or so above ground level to permit 0:01:45.600 --> 0:01:48.360 an elaborate system to pump cool air up into the 0:01:48.360 --> 0:01:51.560 computer ax That explains the high ceilings, which let the 0:01:51.680 --> 0:01:55.360 warm air rise to be recycled through the cooling system. 0:01:55.880 --> 0:01:58.360 Schwartz says the race to build data centers like his 0:01:58.480 --> 0:02:01.560 in Texas is only getting started, with Cyrus one in 0:02:01.600 --> 0:02:05.240 the process of adding additional buildings and capacity next to 0:02:05.280 --> 0:02:06.440 its current facilities. 0:02:07.400 --> 0:02:11.679 The risk to us as a developer for those customers 0:02:12.280 --> 0:02:14.200 is to ensure that we can keep up with their 0:02:14.240 --> 0:02:18.440 demand and that we're delivering both capacity and service at 0:02:18.440 --> 0:02:23.720 the levels they require. They're all operating mission critical infrastructure, 0:02:23.760 --> 0:02:28.680 and their expectations are intensely high. We do our best 0:02:28.720 --> 0:02:31.480 and are constantly investing to ensure that we can keep 0:02:31.560 --> 0:02:35.120 up with those expectations. But our real challenge is to 0:02:35.160 --> 0:02:38.280 make sure that we're keeping up with their requirements because 0:02:38.280 --> 0:02:41.960 they're counting on this infrastructure to support the growth investments 0:02:42.000 --> 0:02:42.720 that they're making. 0:02:43.400 --> 0:02:46.680 Keeping up with those requirements is not going to be easy. 0:02:47.000 --> 0:02:48.920 But the good news for the United States is that 0:02:48.960 --> 0:02:51.560 it has a strong head start. There are more than 0:02:51.639 --> 0:02:55.080 seven thousand data centers worldwide, with nearly two thousand in 0:02:55.120 --> 0:02:59.639 America alone. US data center capacity grew almost a quarter 0:02:59.680 --> 0:03:03.040 in the last year alone, with another seventy percent set 0:03:03.080 --> 0:03:05.880 to come online from centers already under construction. 0:03:05.960 --> 0:03:10.640 Today, the United States is a substantially larger data center 0:03:10.680 --> 0:03:13.240 market than the other regions around the world, and that's 0:03:13.320 --> 0:03:17.079 driven in part by the adoption of the Internet, by 0:03:17.120 --> 0:03:20.160 the presence of the large technology companies who are based here, 0:03:20.520 --> 0:03:23.800 but also by the fact that investment and progress against 0:03:23.880 --> 0:03:27.920 artificial intelligence here in the United States is further advanced 0:03:27.960 --> 0:03:30.440 than it is in other regions, and so right now 0:03:30.919 --> 0:03:33.960 you'll see much stronger demanding growth in the United States. 0:03:34.760 --> 0:03:38.080 Other countries around the world are very focused on the 0:03:38.160 --> 0:03:42.440 implications of artificial intelligence and are concerned about making sure 0:03:42.480 --> 0:03:46.280 that they have the infrastructure in their economies to keep up. 0:03:46.760 --> 0:03:51.680 And so we're seeing and will continue to see efforts 0:03:51.720 --> 0:03:55.080 by other countries around the world to support that type 0:03:55.120 --> 0:03:59.080 of infrastructure in their countries to support their economies and 0:03:59.120 --> 0:03:59.680 their growth. 0:04:00.200 --> 0:04:04.840 Valtimore Slayzak is kkir's global head of Digital Infrastructure. His 0:04:04.960 --> 0:04:08.520 firm is making big investments in data centers, including when 0:04:08.520 --> 0:04:12.120 it teams with Global Infrastructure partners to buy Eric Schwartz's 0:04:12.320 --> 0:04:15.880 Cyrus one for fifteen billion dollars back in twenty twenty two. 0:04:16.760 --> 0:04:20.000 Like Schwartz, he sees big opportunities coming in Europe and 0:04:20.080 --> 0:04:20.640 in Asia. 0:04:21.480 --> 0:04:25.080 US is definitely, at least from our perspective, well ahead 0:04:25.160 --> 0:04:27.240 in terms of the deployment of AI, and I think 0:04:27.279 --> 0:04:30.040 it is a strategic element of I think the growth 0:04:30.080 --> 0:04:32.159 going forward. If you just think about a couple of 0:04:32.200 --> 0:04:35.599 maybe examples cloud companies, US cloud companies have about seventy 0:04:35.600 --> 0:04:39.360 five percent global market share in terms of AI funding. 0:04:39.560 --> 0:04:42.440 Eighty percent of it is coming in the United States. 0:04:42.920 --> 0:04:45.960 So US is definitely leading the charge, so to speak, 0:04:45.960 --> 0:04:48.240 in terms of deployment. But I think we see the 0:04:48.560 --> 0:04:51.760 similar playbook being applied in Europe and in Asia Pacific. 0:04:51.800 --> 0:04:54.000 But just to try to quantify the scale of it. 0:04:54.480 --> 0:04:57.120 US data center market is about a fifteen gigabott market 0:04:57.320 --> 0:05:01.599 growing to forty gigawatts. European market is about six gigabotte market, 0:05:02.440 --> 0:05:05.400 likely going to triple or quadruple over the next four 0:05:05.440 --> 0:05:08.320 or five years to twenty gigabotts, and then Asia Pacific 0:05:08.520 --> 0:05:11.440 x China is on a similar trajectory, so the scale 0:05:11.520 --> 0:05:15.360 is really different between US and those other markets. 0:05:16.440 --> 0:05:19.479 Meeting that growing demand for data centers will not be easy. 0:05:19.839 --> 0:05:22.279 There are a host of potential hurdles that people like 0:05:22.360 --> 0:05:25.719 Christine Wood, headed the data center practice at Burns McDonald, 0:05:26.000 --> 0:05:28.080 are finding ways to overcome. 0:05:29.040 --> 0:05:36.760 We're looking at water availability, connectivity, location, demand, latency, and 0:05:36.800 --> 0:05:39.560 then we secondarily look at the regulations, whether or not 0:05:39.600 --> 0:05:43.360 they have zoning appropriate, zoning requirements, tax incentives, and really 0:05:43.400 --> 0:05:46.000 if it makes a business business sense to be in 0:05:46.000 --> 0:05:49.520 that specific location. And then once you go into more 0:05:49.560 --> 0:05:53.360 of the design and construction, what we're starting to see 0:05:53.600 --> 0:05:57.080 and what we have been doing, especially with our construction arm, 0:05:57.360 --> 0:06:00.320 is that we really want to get ahead of some 0:06:00.400 --> 0:06:03.320 of the labor and craft labor shortages that we see 0:06:03.360 --> 0:06:06.919 out on site, and so we are designing data centers 0:06:07.360 --> 0:06:11.559 that are more modular, have skid are able to work 0:06:11.720 --> 0:06:17.640 within the craft shops of these different self performed contractors, 0:06:18.040 --> 0:06:20.839 so that we can deploy these data centers more rapidly 0:06:20.960 --> 0:06:23.320 and on a scalable basis. 0:06:24.000 --> 0:06:26.680 But as big as those obstacles may be, the biggest 0:06:26.720 --> 0:06:29.839 by far is finding the electricity of the centers require, 0:06:30.200 --> 0:06:32.919 with Goldman Sachs estimating that they already consume one to 0:06:32.960 --> 0:06:36.480 two percent of all the power supplied worldwide and that 0:06:36.480 --> 0:06:39.600 that number could double by the end of the decade. 0:06:40.240 --> 0:06:43.120 Power is becoming the long pole in the tent to 0:06:43.200 --> 0:06:46.200 be able to find a data center site, and so 0:06:46.279 --> 0:06:49.600 it really starts with that is the power puzzle that 0:06:49.640 --> 0:06:52.920 we're seeing associated with the data center sites. And so 0:06:53.560 --> 0:06:57.760 when we're walking through looking for great sites and supporting 0:06:57.839 --> 0:07:01.760 our clients on the site due diligence is we're looking for. 0:07:01.880 --> 0:07:05.160 Power is the number one item. 0:07:04.920 --> 0:07:08.920 For data centers and their clients. Having enough power is necessary, 0:07:09.080 --> 0:07:12.080 but not sufficient. The power also has to be there 0:07:12.120 --> 0:07:16.400 without fail and without interruption of any kind. 0:07:15.840 --> 0:07:19.640 No excuses. The infrastructure that it's operating here needs to 0:07:19.640 --> 0:07:22.320 be available twenty four hours a day, three hundred and 0:07:22.360 --> 0:07:26.040 sixty five days a year. Without interruption. So where it 0:07:26.160 --> 0:07:28.880 starts is that for all of the equipment that we 0:07:28.960 --> 0:07:32.640 have deployed here, whether it's the battery banks, whether it's 0:07:32.680 --> 0:07:35.480 the cooling units, all of that, there is always a 0:07:35.520 --> 0:07:38.360 backup for that equipment in the event that something were 0:07:38.360 --> 0:07:40.680 to fail, and things always fail and you need to 0:07:40.720 --> 0:07:43.720 have a backup to ensure that you don't have an interruption. 0:07:44.160 --> 0:07:47.600 That backup at cyrus One's new Texas facility means layer 0:07:47.720 --> 0:07:51.560 after layer of redundancy. The facility gets power straight from 0:07:51.600 --> 0:07:54.760 the grid, but if that fails, batteries located behind the 0:07:54.800 --> 0:07:58.119 data center kick in. Those batteries are kept fully charged 0:07:58.160 --> 0:08:01.160 by a series of generators which are constantly running, and 0:08:01.240 --> 0:08:04.240 if all else fails, behind the batteries are a role 0:08:04.280 --> 0:08:08.560 of equally large diesel powered locomotive engines. If a power 0:08:08.600 --> 0:08:11.520 outage lasts beyond the life of the batteries, the engines 0:08:11.560 --> 0:08:14.800 take over to ensure there's nothing to stop the center's operation, 0:08:15.000 --> 0:08:19.280 including its elaborate cooling system, no matter what the problem. 0:08:19.880 --> 0:08:23.040 Eric Schwartz says this unprecedented need for a liable power 0:08:23.080 --> 0:08:25.400 goes beyond just finding out where to get it and 0:08:25.440 --> 0:08:28.120 how to make sure it's uninterrupted. It also demands an 0:08:28.200 --> 0:08:31.320 upgrade if the entire way we generate and distribute power 0:08:31.360 --> 0:08:33.280 in the United States and elsewhere. 0:08:33.679 --> 0:08:39.360 So data centers are effectively technology factories, and like any factory, 0:08:39.840 --> 0:08:44.319 we draw power to operate to operate the factory. And 0:08:44.400 --> 0:08:48.000 so the challenge and the work that we do is 0:08:48.040 --> 0:08:50.400 to work very closely with the utilities and the grid 0:08:50.440 --> 0:08:53.880 operators to identify the right locations where we can connect 0:08:53.920 --> 0:08:56.960 to that power and ultimately deliver it to our customers. 0:08:57.040 --> 0:09:01.040 And this requires work and require there's a lot of collaboration. 0:09:01.360 --> 0:09:04.640 But the United States in particular, then other countries as 0:09:04.640 --> 0:09:08.440 well are investing in growing their power infrastructure, not only 0:09:08.480 --> 0:09:13.800 for scale but for sustainability, and we're very focused on 0:09:13.880 --> 0:09:15.960 making sure that we're locating in the right places. 0:09:16.840 --> 0:09:19.920 Ultimately, what we think is will require a comprehensive solution. 0:09:20.520 --> 0:09:24.400 So the technology companies themselves are large consumers of of 0:09:24.559 --> 0:09:29.040 course this infrastructure, but that's not the only demand driver. 0:09:29.160 --> 0:09:32.880 It's also unsharing, it's electrification. So there's other what I 0:09:32.880 --> 0:09:36.199 would say are great signs of economic progress and growth 0:09:36.320 --> 0:09:38.520 in the United States, and we should be really proud 0:09:38.600 --> 0:09:41.960 of that, but it requires a new investment in generation 0:09:42.160 --> 0:09:44.520 and in transmission right, it's something that we really haven't 0:09:44.559 --> 0:09:47.120 seen over the last twenty years. So if you look 0:09:47.120 --> 0:09:50.280 at the US grid over the last twenty years, effectively 0:09:50.320 --> 0:09:53.000 stagnated in terms of the demand growth at about forty 0:09:53.040 --> 0:09:55.560 one hundred TARO wide hours. What's really interesting that there's 0:09:55.559 --> 0:09:59.680 been an interesting energy transition during that time. We've decommissioned 0:09:59.720 --> 0:10:02.280 a lot of call plants that's dropped by a sixty 0:10:02.280 --> 0:10:05.560 five percent, We've increased generation from natural gas by at 0:10:05.559 --> 0:10:09.040 one hundred and seventy percent, and increased generation from renewables, 0:10:09.200 --> 0:10:12.000 and so the grid itself has really gone a very 0:10:12.040 --> 0:10:15.000 positive transformation. And so what do we think with this 0:10:15.120 --> 0:10:18.320 level of growth. The expectation is that the men side 0:10:18.360 --> 0:10:19.920 of energy will have to go up at a two 0:10:20.000 --> 0:10:22.120 to three percent, which is really different than what the 0:10:22.200 --> 0:10:24.960 industry had seen over the last twenty years. And so 0:10:25.040 --> 0:10:27.959 it require new generation to be developed and likely increase 0:10:28.040 --> 0:10:32.160 investments in the transmission infrastructure to help enable this. And 0:10:32.200 --> 0:10:34.760 I think from our perspective, we believe that again this 0:10:34.840 --> 0:10:38.960 partnership could really create a power powerful solution. 0:10:39.840 --> 0:10:42.640 The source of the energy used to power data centers 0:10:42.640 --> 0:10:45.080 has become a key part of the equation At a 0:10:45.120 --> 0:10:47.360 time when the world is trying to wean itself off 0:10:47.360 --> 0:10:50.240 of fossil fuels, it raises the question of whether meeting 0:10:50.320 --> 0:10:52.920 the demand will come at the cost of warming the 0:10:52.960 --> 0:10:56.600 planet even further, something that those commissioning new data centers 0:10:56.600 --> 0:10:58.160 have very much in mind. 0:10:59.360 --> 0:11:02.559 We continue to see our clients have a lot of 0:11:02.600 --> 0:11:06.480 sustainability goals around renewable and green energy, which is really 0:11:06.520 --> 0:11:10.120 really great to see, and so with that, you also 0:11:10.559 --> 0:11:14.800 want to think about where that capacity is coming from. 0:11:15.040 --> 0:11:19.320 With renewables, solar and wind come on and off the 0:11:19.360 --> 0:11:22.360 grid because the sun's not always shining or the wind's 0:11:22.360 --> 0:11:25.320 not always blowing, and so a lot of times, some 0:11:25.440 --> 0:11:29.480 of the other power generation plants, especially nuclear, they can't 0:11:29.559 --> 0:11:32.240 ramp up and down on the grid like solar and 0:11:32.360 --> 0:11:37.240 wind can. And so you actually have some capacity available 0:11:37.360 --> 0:11:41.199 at some of these nuclear power plants in order to 0:11:41.240 --> 0:11:44.240 serve some of these data center customers. And then data 0:11:44.240 --> 0:11:50.400 centers also are a really good marriage for that nuclear 0:11:50.520 --> 0:11:53.680 plant because they have a constant load. 0:11:54.520 --> 0:11:57.520 Cyrus One's customers are demanding that it find more ways 0:11:57.559 --> 0:12:00.480 to get power from sustainable sources, but the company owner 0:12:00.559 --> 0:12:03.760 KKR is seeking the same not just for Cyrus one, 0:12:04.040 --> 0:12:08.959 but for its infrastructure investments overall spike in power demand. 0:12:09.400 --> 0:12:11.280 What does that mean for the climate, Because at the 0:12:11.320 --> 0:12:13.600 same time we were trying to get away from fossil fuels. 0:12:13.800 --> 0:12:15.800 Try to say the climate, how do you put those 0:12:15.840 --> 0:12:16.360 two together. 0:12:16.440 --> 0:12:19.360 We're obviously a huge investor in energy transition and we're 0:12:19.360 --> 0:12:21.200 big believers in that. I don't think that those are 0:12:21.240 --> 0:12:24.679 necessarily mutually exclusive. It's part of a comprehensive solution. So 0:12:25.120 --> 0:12:30.360 as I just mentioned investments in generation effectively decommissioned call plants, 0:12:30.600 --> 0:12:33.360 investments and natural gas plants, those are not only things 0:12:33.400 --> 0:12:36.600 that help affordability, but also energy security. So we believe, 0:12:36.920 --> 0:12:39.000 as you know, through our portfolio, we've been a very 0:12:39.080 --> 0:12:43.960 large investor in renewable We have ten renewal platforms across 0:12:44.000 --> 0:12:46.840 the globe, invested over thirty four billion dollars in sustainability 0:12:46.880 --> 0:12:48.920 since twenty and ten, and we think that's an important 0:12:48.960 --> 0:12:49.720 part of this solution. 0:12:50.640 --> 0:12:54.040 You're listening to Bloomberg Wall Straight Week with David Weston 0:12:54.160 --> 0:12:58.720 from Bloomberg Radio. This is Bloomberg Wall Straight Week with 0:12:58.880 --> 0:13:01.280 David Weston's from Bloomberg Radio. 0:13:02.440 --> 0:13:05.960 This is a story about reconciliation, something we may not 0:13:06.120 --> 0:13:09.360 set out to achieve, something we might even resist as 0:13:09.440 --> 0:13:11.840 long as we can, but something that most of us 0:13:11.960 --> 0:13:15.240 end up coming around to in the end, reconciling with 0:13:15.280 --> 0:13:18.160 one another today for the sake of what our children 0:13:18.360 --> 0:13:23.040 need tomorrow. There's no shortage of issues, important issues for 0:13:23.160 --> 0:13:26.200 us to disagree about, like whether our economy needs the 0:13:26.240 --> 0:13:28.080 government to tax less. 0:13:27.960 --> 0:13:31.719 Cut taxes very substantially and create a great economy, or 0:13:31.760 --> 0:13:32.760 spend more. 0:13:32.679 --> 0:13:37.360 First time home buyers with twenty five thousand dollars, or. 0:13:37.200 --> 0:13:39.920 What we should do about our southern border. 0:13:39.559 --> 0:13:42.840 Allowing these millions and millions of people to come into 0:13:42.840 --> 0:13:45.680 our country, and look at what's happening to the towns 0:13:45.800 --> 0:13:47.640 all over the United States. 0:13:47.400 --> 0:13:49.520 Have a broken immigration system and we need to fix it. 0:13:50.320 --> 0:13:53.680 Every year in the Mountains of Colorado, the Aspen Economic 0:13:53.760 --> 0:13:57.800 Strategy Group gathers leaders from business, government, and academia to 0:13:57.880 --> 0:14:01.920 find common ground on important issue like these, seeking to 0:14:02.040 --> 0:14:05.840 use evidence about the effects of policy to resolve policy 0:14:06.120 --> 0:14:09.760 differences and to bring us closer to that reconciliation we 0:14:09.880 --> 0:14:12.880 all need. So we went to Aspen to speak with 0:14:12.920 --> 0:14:16.319 the group's executive director, Melissa Karney, who said that today 0:14:16.720 --> 0:14:19.080 reconciliation faces a unique threat. 0:14:19.240 --> 0:14:23.080 What's really interesting and I think challenging is our country 0:14:23.160 --> 0:14:29.720 is definitely facing a reconsideration of an economic paradigm, and 0:14:29.800 --> 0:14:33.200 from both parties, we're seeing a move towards more nationalist sentiment, 0:14:33.320 --> 0:14:36.880 more protectionist sentiment, things that really move away from the 0:14:37.120 --> 0:14:41.520 market based economic framework that's driven growth and dynamism for 0:14:41.560 --> 0:14:44.960 so long. And so the agenda for this year is 0:14:45.000 --> 0:14:47.680 really based on all, right, let's take this as given 0:14:48.000 --> 0:14:52.320 to you. Political concerns, national security concerns, domestic discontent are 0:14:52.440 --> 0:14:56.600 driving this reconsideration. And so we're pulling together people who 0:14:56.640 --> 0:14:58.920 have studied these issues, who have worked on these issues, 0:14:58.960 --> 0:15:01.280 who have been in government and grappled with these issues 0:15:01.320 --> 0:15:04.080 for a very long time, to try and say, what 0:15:04.200 --> 0:15:07.760 kind of trade policy should the US pursue. How can 0:15:07.800 --> 0:15:11.800 we pursue industrial policy in a way that preserves and 0:15:11.960 --> 0:15:16.200 promotes economic dynamism and economic growth while addressing the very 0:15:16.240 --> 0:15:20.840 real national security and economic domestic challenges that are driving 0:15:20.840 --> 0:15:21.800 this reconsideration. 0:15:22.240 --> 0:15:24.680 One of the biggest issues in Aspen this year the 0:15:24.680 --> 0:15:27.600 federal debt and what can be done about it. Since 0:15:27.600 --> 0:15:29.960 the early two thousands, the United States has faced an 0:15:30.000 --> 0:15:33.440 annual budget deficit as the government began spending more than 0:15:33.440 --> 0:15:37.480 it collected through taxes. That deficit was made worse, first 0:15:37.520 --> 0:15:40.600 by the Great Financial Crisis and then by the COVID 0:15:40.680 --> 0:15:44.960 nineteen pandemic. In both instances, the US government stepped in 0:15:45.040 --> 0:15:48.720 to rescue the economy, sending the federal debt surging from 0:15:48.840 --> 0:15:52.200 nine point four trillion dollars before the Great Financial Crisis 0:15:52.360 --> 0:15:55.760 to a whopping thirty five trillion dollars to day. And 0:15:55.840 --> 0:15:59.040 the debt just keeps on coming, with the Congressional Budget 0:15:59.040 --> 0:16:01.600 Office expecting it to go by an additional two trillion 0:16:01.640 --> 0:16:05.320 dollars this year alone. But if there's any good news 0:16:05.320 --> 0:16:08.520 about the deficit, it could be that its alarming size 0:16:08.720 --> 0:16:11.880 might force America's leaders to do something about it, even 0:16:11.880 --> 0:16:15.560 if it means coming together from very different places. First 0:16:15.640 --> 0:16:19.720 rule of holes is to stop digging, and you have 0:16:19.800 --> 0:16:22.880 to the people who are in those positions of consequence 0:16:22.920 --> 0:16:26.200 responsibility have to understand that they have to govern with 0:16:26.280 --> 0:16:30.280 a recognition of limits. Tim Geitner served as Treasury Secretary 0:16:30.280 --> 0:16:33.960 and President Obama's decidedly democratic administration, but when it comes 0:16:33.960 --> 0:16:36.720 to the federal deficit, he's not far away from former 0:16:36.760 --> 0:16:39.480 Republican House Speaker, Kevin McCarthy. 0:16:39.120 --> 0:16:40.880 You got to do something with the debt. You can't 0:16:40.960 --> 0:16:45.120 maintain because what we did when COVID had and you 0:16:45.200 --> 0:16:46.920 look in just hindsight, we didn't know what was going 0:16:46.960 --> 0:16:49.680 to happen, so we up the spending knowing what was 0:16:49.680 --> 0:16:53.160 coming out, but Congress never pulls it back. You've got 0:16:53.280 --> 0:16:58.160 some entitlements that are so critical, but you want to 0:16:58.160 --> 0:17:00.040 sustain those and be able to So you've got to 0:17:00.040 --> 0:17:01.200 deal with it now, but you've got to do it 0:17:01.240 --> 0:17:04.440 in a bipartisan manner. Otherwise one party attacks the other. 0:17:05.119 --> 0:17:09.080 Like McCarthy, Tim Geidner sees, bipartisanship is the only way 0:17:09.160 --> 0:17:12.320 to address a problem that's only becoming more complicated with 0:17:12.480 --> 0:17:13.560 each passing year. 0:17:13.840 --> 0:17:17.000 In some ways, it's a much harder challenge because we're 0:17:17.040 --> 0:17:19.720 going to have to spend more in defense, and because 0:17:19.720 --> 0:17:21.479 we have an aging population, it's going to be more 0:17:21.480 --> 0:17:24.840 expensive to give them healthcare over time, and so we're 0:17:25.040 --> 0:17:28.240 starting from a very bad place. They're going to have 0:17:28.280 --> 0:17:30.919 to make some trade offs, and of course these are 0:17:30.920 --> 0:17:32.960 things you know you can't do in a partisan basis. 0:17:33.119 --> 0:17:34.920 You know, one of the great strengths of what Hank 0:17:35.040 --> 0:17:37.320 is built here is you know, you do get people 0:17:38.040 --> 0:17:41.480 from different parts of the polical spectrum who disagree on 0:17:41.560 --> 0:17:45.760 fundamental things to come together and sit there and listen 0:17:45.800 --> 0:17:49.560 to people deep expertise, to debate hard things, and to 0:17:49.600 --> 0:17:54.240 try to recreate a place where you can have hard, 0:17:54.560 --> 0:17:57.960 pragmatic conversations about those tough trade offs ahead. 0:17:58.920 --> 0:18:02.800 That Hank is talking about is his predecessor as Treasure Secretary, 0:18:02.920 --> 0:18:07.520 Hank Paulson, who served under President George W. Bush. Paulson 0:18:07.600 --> 0:18:10.440 agrees with both Geitner and McCarthy that the debt is 0:18:10.520 --> 0:18:14.320 a big problem, but he also sees a silver lining. 0:18:14.840 --> 0:18:16.920 I would say, so I get asked all the time 0:18:16.960 --> 0:18:19.520 about the economy, and I say, listen, don't ask me 0:18:19.560 --> 0:18:21.480 about when the Fed's going to kind of interest rates 0:18:21.560 --> 0:18:25.400 or what have you. Because we're in a great spot here. 0:18:25.720 --> 0:18:27.840 But the one thing we know, the big cloud on 0:18:27.880 --> 0:18:32.200 the horizon is our federal debt. It's unsustainable and if 0:18:32.240 --> 0:18:36.240 not checked, it's altimately going to destroy our prosperity, which 0:18:36.800 --> 0:18:40.399 can undermine our security, which is rooted in our economic strength. 0:18:40.920 --> 0:18:42.840 And so the way I think about it, if you 0:18:42.880 --> 0:18:45.159 want to look at the dark cloud right on the 0:18:45.200 --> 0:18:48.760 negative side, that so many of us who have talked 0:18:48.760 --> 0:18:51.560 about the deficit for so long it looks like we're 0:18:51.560 --> 0:18:55.680 crying wolf, right, and so politicians and both parties sort 0:18:55.720 --> 0:18:59.600 of are ignoring it. Right. But the longer we wait, 0:19:00.280 --> 0:19:03.000 the more expensive it's going to be and the more 0:19:03.080 --> 0:19:05.640 dangerous it's going to be to clean up this mess 0:19:05.680 --> 0:19:09.119 before it strangles us. And so again, but that's the 0:19:09.160 --> 0:19:12.399 bad news. Now what's the good news. The good news 0:19:12.520 --> 0:19:15.320 is we're a rich country. Right there's a lot we 0:19:15.359 --> 0:19:17.359 can do if we start working on it right away. 0:19:18.000 --> 0:19:20.960 We're gonna need both revenues. We're gonna need taxes and 0:19:21.000 --> 0:19:24.200 we're gonna need spending cuts. And people on each side 0:19:24.200 --> 0:19:27.240 don't like to hear that, but there's plenty of ways 0:19:27.720 --> 0:19:31.639 we can raise revenues and not impede growth by just 0:19:31.720 --> 0:19:36.639 closing preferences and loopholes in the tax code. And believe me, 0:19:36.760 --> 0:19:39.520 you can't deal with us without dealing with entitlements. But 0:19:39.600 --> 0:19:43.480 you can clearly deal with entitlements through means testing and 0:19:43.520 --> 0:19:47.040 other mechanisms while protecting those that need it the most. 0:19:47.320 --> 0:19:48.439 So we can do both. 0:19:49.080 --> 0:19:51.520 If Hank Paulson says we can get there, many of 0:19:51.600 --> 0:19:53.960 us will believe him. He helped lead us out of 0:19:54.000 --> 0:19:56.720 the Great Financial Crisis after all. But even if we 0:19:56.840 --> 0:19:59.119 have a sense of where we need to go, what 0:19:59.320 --> 0:20:03.240 are the steps between here and there? Paulson says part 0:20:03.280 --> 0:20:05.680 of the answer is having a Treasury secretary who has 0:20:05.680 --> 0:20:09.280 the trust of the president and ultimately those on both 0:20:09.359 --> 0:20:10.480 sides of the isle. 0:20:11.200 --> 0:20:16.000 The number one priority is, first and foremost, develop a 0:20:16.080 --> 0:20:20.879 relationship of trust with the presidents, because Treasury secretary sounds 0:20:20.920 --> 0:20:24.679 like it's a very important position, and it is, but 0:20:24.800 --> 0:20:28.280 all the power really comes to what's delegated by the president, 0:20:29.119 --> 0:20:31.440 and then the relationships they can build on both sides 0:20:31.440 --> 0:20:34.200 of the isle. Right, So what you have to do 0:20:34.560 --> 0:20:38.800 is you have to convince Democrats and Republicans come with 0:20:38.840 --> 0:20:42.359 ways to bring them together. Regulators are independent, but you 0:20:42.400 --> 0:20:45.720 can have a lot to say if you build relationships. 0:20:46.080 --> 0:20:48.960 So I think a lot of it first and foremost 0:20:49.040 --> 0:20:52.360 is building that relationship of trust, right with the president, 0:20:53.040 --> 0:20:57.679 with both sides Democrats and Republicans in Congress, and with 0:20:57.800 --> 0:20:58.440 your colleagues. 0:20:58.760 --> 0:21:02.440 Pulson's successor agree Ease, but says a Treasury secretary needs 0:21:02.440 --> 0:21:05.960 to balance working across the aisle with speaking truth to. 0:21:06.000 --> 0:21:09.800 Power and with markets and with people around the world 0:21:10.040 --> 0:21:13.240 that want to believe that they can trust in what 0:21:13.280 --> 0:21:16.159 you say, and you'll make choices with integrity. But I 0:21:16.160 --> 0:21:18.240 think Hank's absolutely right. The most important thing is that 0:21:18.520 --> 0:21:19.840 you have to recognize you have to be in a 0:21:19.880 --> 0:21:23.240 position where you are able to say what you think 0:21:23.480 --> 0:21:26.560 is truth and what is important for the country to 0:21:26.600 --> 0:21:28.080 do or not to do. And sometimes you have to 0:21:28.080 --> 0:21:30.960 be the break and the constraint, and sometimes you have 0:21:31.040 --> 0:21:33.840 to be the accelerator, the catalysts that try to move 0:21:33.880 --> 0:21:37.440 a system that's hard to move to better choices. 0:21:37.600 --> 0:21:41.000 I've always said, you don't want some other's Treasury secretary 0:21:41.280 --> 0:21:43.760 who's a politician who wants some day to be president 0:21:43.800 --> 0:21:46.919 of the United States, right, because there's a tendency to 0:21:46.960 --> 0:21:49.840 say what people want to hear, right, And you need 0:21:49.880 --> 0:21:52.280 to talk about what people need to hear. But you 0:21:52.440 --> 0:21:54.560 need to have the support of your president to be 0:21:54.560 --> 0:21:55.520 able to speak that way. 0:21:55.840 --> 0:21:58.640 But let's face it, if we're politically easy to fix 0:21:58.680 --> 0:22:01.080 our problem of rising down, we would have done it 0:22:01.160 --> 0:22:01.840 long before. 0:22:01.880 --> 0:22:02.160 Now. 0:22:02.680 --> 0:22:05.440 Kevin McCarthy knows a thing or two about the intersection 0:22:05.560 --> 0:22:07.160 of politics and policy. 0:22:07.840 --> 0:22:10.119 The interesting part about government. You've got very best idea, 0:22:10.119 --> 0:22:11.919 but that doesn't mean it passes. So you have to 0:22:12.000 --> 0:22:15.760