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

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Speaker 2: We welcome our TV audience and radio listeners here in Virginia.

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Speaker 2: I'm sitting down with Treasury Secretary Janet Yellen. Thank you

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Speaker 2: so much, Madam Secretary, for joining Bloomberg.

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Speaker 1: Thanks to the invitation.

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Speaker 2: We're in Stafford County. This is a county that Trump

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Speaker 2: won in twenty sixteen but flipped to Biden in twenty twenty,

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Speaker 2: and you're here to talk about the fiscal agenda that

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Speaker 2: we've seen out of this administration, bringing highlighting. You're going

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Speaker 2: to highlight there's millions of dollars to broadband in rural

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Speaker 2: areas like Virginia. Yet when you look at consumer sentiment

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Speaker 2: recent on Friday the Michigan Serve, and you look at

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Speaker 2: recent polls, inflation remains.

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Speaker 1: Top of vine for American voters.

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Speaker 2: How do you get them to potentially look at the

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Speaker 2: way you look at how the economy is working well.

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Speaker 3: The cost of living in many areas is very high,

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Speaker 3: and it is a concern to Americans, and it is

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Speaker 3: President Biden's top priceority to do all he can to

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Speaker 3: bring down the cost of living. Why I'm here in

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Speaker 3: Stafford County though, is it really illustrates one way in

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Speaker 3: which that's going to occur. I'm looking at an area

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Speaker 3: that has been deprived, has had really no access to

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Speaker 3: the Internet at all, sufficiently remote part of Virginia, and

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Speaker 3: President Biden has made a commitment that every American household

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Speaker 3: and business should have access to the Internet, and funds

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Speaker 3: that were included in the American Rescue Plan that was

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Speaker 3: passed in twenty twenty one and then later the bipart

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Speaker 3: is an Infrastructure Bill provided substantial funding to make sure

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Speaker 3: that the Internet is available everywhere and that it's also affordable.

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Speaker 3: And what we saw during the pandemic is that access

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Speaker 3: to the Internet is critical to education, to jobs, to healthcare,

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Speaker 3: and it's really a critical tool that every family needs

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Speaker 3: to have access to. And so making that available and

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Speaker 3: making sure it's affordable, which is what I'm going to

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Speaker 3: be seeing here today. Project that has succeeded in reaching

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Speaker 3: about seven hundred households in this area. This is one

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Speaker 3: way in which President Biden's working to lower the cost

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Speaker 3: of living, but there are many other areas as well.

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Speaker 3: Prescription drugs brought down the cost of insulin to thirty

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Speaker 3: five dollars a month, working very hard to bring down

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Speaker 3: the cost of energy. At the same time, we're protecting

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Speaker 3: the environment and bolstering the finances of households by extending

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Speaker 3: the child tax credit and an income tax credit.

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Speaker 2: If inflation, though, is still top of mind of American

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Speaker 2: Americans today, why then tomorrow, or it's likely expected the

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Speaker 2: bid administration is going to lift the walls even higher

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Speaker 2: when it comes to Chinese goods, why then raised tariffs?

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Speaker 3: The President believes that it's critically important for the United

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Speaker 3: States to have a role and a presence in strategic

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Speaker 3: industries like semiconductors and like clean energy that are going

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Speaker 3: to be the foundation of good jobs and national security

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Speaker 3: in the decades ahead. He believes it's receptible, as I do,

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Speaker 3: to be completely dependent on China in these areas, and

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Speaker 3: he wants to make sure, given that China is really

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Speaker 3: not playing by the rules in the sense they have

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Speaker 3: enormous subsidies in critical areas of advanced manufacturing has resulted

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Speaker 3: in over capacity, he wants to make sure that the

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Speaker 3: stimulus that's being provided through the Inflation Reduction Act to

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Speaker 3: support these industries. And these are industries that are creating

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Speaker 3: good manufacturing jobs in parts of the country that have

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Speaker 3: been overlooked or have suffered from de industrialization in the past.

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Speaker 3: The President wants to make sure that he protects these investments.

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Speaker 3: And I don't want to get ahead of the three

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Speaker 3: to zero one review on tariffs, but this is a

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Speaker 3: commitment that UH President Biden has made and I agree

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Speaker 3: with that. I was in China just a couple of

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Speaker 3: weeks ago and made clear that we would not allow

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Speaker 3: Chinese over capacity to harm our emerging industries.

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Speaker 2: Does the US want a trade war though with China?

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Speaker 3: We w We believe that we should have a deep

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Speaker 3: and productive and that we do in most areas UH

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Speaker 3: trade and investment relationship. We're working to stabilize our economic relationship.

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Speaker 3: We do not wish to disengage from China economically, but

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Speaker 3: we do think that the playing field should be fair,

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Speaker 3: and China engages in unfair practices like massive subsidies of

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Speaker 3: industries they have decided are critical, and those are cases

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Speaker 3: where we will act to protect ourselves.

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Speaker 2: We've seen Beijing in the past as though respond and

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Speaker 2: it's become tit for tat.

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Speaker 1: Are you expecting a response?

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Speaker 2: Could they go after Tesla or maybe American farm products?

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Speaker 3: Well? President Biden believes that anything we do should be

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Speaker 3: targeted to our concerns and not broad based. And hopefully

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Speaker 3: we will not see a significant Chinese response, but that's

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Speaker 3: always a possibility.

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Speaker 1: China is big focus going into the election.

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Speaker 2: We hear the former president also talk about he wants

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Speaker 2: to put a sixty percent import tariff potential and all

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Speaker 2: Chinese goods. He also over the weekend was talking about

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Speaker 2: the Trump era tax cuts that are set to expire

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Speaker 2: next year. Trump over the weekend said, Biden will give

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Speaker 2: you a tax hike. If it was up to Trump,

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Speaker 2: it would be a cut on upper middle, lower and

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Speaker 2: the business class. Are you envisioning these tax cuts to

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Speaker 2: be extended.

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Speaker 3: Well, what President Biden has said, and I certainly strongly

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Speaker 3: agree with it, is that we want to make sure

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Speaker 3: that working families earning under four hundred thousand dollars are

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Speaker 3: not faced with the tax hike, but all of the

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Speaker 3: wealthy individuals and corporations that benefited from the Tax Cut

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Speaker 3: and Jobs Act, where there are provisions that are going

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Speaker 3: to expire. The President, for the sake of working families

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Speaker 3: and tax fairness, believes that the rich incorporation should pay

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Speaker 3: their fair share. And I would say that CBO. The

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Speaker 3: Congressional Budget Office recently estimated that extending all of the

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Speaker 3: provisions of TCJA would cost five trillion dollars over the

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Speaker 3: next decade. And we really do need to be on

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Speaker 3: a fiscally sustainable path. The President has already signed and

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Speaker 3: put into effect a trillion dollars of deficit reduction over

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Speaker 3: the next decade, and he's proposed in his twenty twenty

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Speaker 3: five budget in additional three trillion dollars worth of deficit reduction.

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Speaker 3: It really is critical that we are in a fiscally

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Speaker 3: sustainable path. So TCJA, the bulk of the benefits went

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Speaker 3: to the wealthy and to corporations. It blew away the deficit.

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Speaker 3: It caused huge increase in the deficit. It promised an

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Speaker 3: investment boom, and we didn't see it.

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Speaker 2: So should tax revenues be used to lower the deficit? Yes,

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Speaker 2: that one for Biden or where they go to social programs?

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Speaker 1: Well.

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Speaker 3: President Biden believes it's important to invest in areas of

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Speaker 3: the economy that will help us grow and create good jobs,

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Speaker 3: and his budget is won that proposes helping working families

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Speaker 3: and undertaking investments that are critical to our future, but

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Speaker 3: also raising taxes on wealthy individuals who he believes they

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Speaker 3: are not paying their fair share, and raising taxes on

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Speaker 3: corporations that are doing extremely well, and he would both

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Speaker 3: invest in America and help working families and lower the deficit.

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Speaker 2: The US at the moment is spending just as much

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Speaker 2: every year at this point on paying off our debt

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Speaker 2: as it is funding our military. Just the usd lower

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Speaker 2: interest rates in order to balance the budget.

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Speaker 3: Well, we have to take the interest rate path that

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Speaker 3: prevails in the economy as given. The President's budget incorporates

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Speaker 3: the assumption that interest rates will be in line with

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Speaker 3: the projections of private sector forecasters. So there has been

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Speaker 3: an increase in the interest rate path that's assumed, and

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Speaker 3: it's necessary to make sure that we're in a fiscally

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Speaker 3: sustainable path. Of course, the higher interest rate path makes

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Speaker 3: that more difficult, but the president's budget would hold I

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Speaker 3: see the key metric that summarizes the burden of deficits

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Speaker 3: as being its interest cost, and the President's plan would

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Speaker 3: hold interest costs at historical levels and not allow them

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Speaker 3: to rise above that.

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Speaker 2: The federal deficit, though now, is at a level we

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Speaker 2: really don't see outside of recessions. Is anyone in Washington

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Speaker 2: seriously concerned about this, real conversations about bringing debt back

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Speaker 2: to a sustainable path.

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Speaker 3: Well, as I said, the interest cost of the debt

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Speaker 3: is a good way to measure its burden. Generally, interest

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Speaker 3: rates have been lower in spite of recent increases, they

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Speaker 3: have been lower than they were in past decades. And

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Speaker 3: that means that metrics like the ratio of debt to GDP,

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Speaker 3: we can probably manage and have a fiscally sustainable path

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Speaker 3: with somewhat higher ratio of debt to GDP. But it's

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Speaker 3: important to make sure that the real interest burden of

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Speaker 3: the debt, which is a measure of the burden it's

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Speaker 3: placing our economy, we have to make sure that that

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Speaker 3: stays in historically normal level.

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Speaker 2: This isn't just a complain of fiscal hawks either. This

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Speaker 2: is a complaint. I heard a lot at the IMF

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Speaker 2: World Bank meetings. A lot of countries are lining up

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Speaker 2: learned about the path that the US is on and

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Speaker 2: what also that means for the US dollar. I hurt

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Speaker 2: a lot of people reminiscent of the Nixon times say

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Speaker 2: the US it's our currency, but it's your problem, is

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Speaker 2: it right? In that context, then that other countries should

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Speaker 2: be intervening well.

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Speaker 3: Our position is that major countries like those in the

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Speaker 3: G seven, and this has been agreed in the G seven,

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Speaker 3: should have market determined exchange rates, and if intervention occurs,

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Speaker 3: it should be rare, well communicated, and largely to address

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Speaker 3: excessive fluctuations in currencies. That's the system that we essentially

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Speaker 3: have in place, and I think it's worked well. And

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Speaker 3: of course differences in the stance of monetary policy across

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Speaker 3: countries is a factor that influences the value of exchange rates.

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Speaker 2: I'm sure this is going to come up on your

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Speaker 2: next trip. You're going to be meeting with your G

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Speaker 2: seven partners in Italy. There have been reports that Japan

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Speaker 2: has intervened twice. You've said it should be communicated, it

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Speaker 2: should be rare, but they actually haven't worked.

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Speaker 1: So why does it matter.

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Speaker 3: Well, look, I'm not going to comment on a situation

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Speaker 3: in a specific country. I just want to leave it

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Speaker 3: as when there is excessive volatility, it's possible for countries

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Speaker 3: to intervene. It doesn't always work without more fundamental changes

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Speaker 3: in policy, but we believe that should happen very rarely

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Speaker 3: and be communicated to trade partners. If it does.

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Speaker 2: Just on a final point and in this FX world,

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Speaker 2: you're gonna get your G seven partners.

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Speaker 1: Do you have a currency pair that you watch the most?

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Speaker 3: Watch certainly the value of the dollar visa V major

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Speaker 3: currencies like the Euro, the en, the remnant b but

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Speaker 3: what your currency developments generally.

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Speaker 2: Excellent, Treasure Secretary Janet Yellen, We thank you so much

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Speaker 2: for your time. That was, of course US Treasury Secretary

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Speaker 2: Janet Yellen in Virginia talking about and highlighting the millions

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Speaker 2: of dollars that have come out of the fiscal agenda

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Speaker 2: of the Biden administration, and today during this Infrastructure Week,

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Speaker 2: it is about expanding broadband in royal areas.