Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: We welcome our TV audience and radio listeners here in Virginia.
Speaker 2: I'm sitting down with Treasury Secretary Janet Yellen. Thank you
Speaker 2: so much, Madam Secretary, for joining Bloomberg.
Speaker 1: Thanks to the invitation.
Speaker 2: We're in Stafford County. This is a county that Trump
Speaker 2: won in twenty sixteen but flipped to Biden in twenty twenty,
Speaker 2: and you're here to talk about the fiscal agenda that
Speaker 2: we've seen out of this administration, bringing highlighting. You're going
Speaker 2: to highlight there's millions of dollars to broadband in rural
Speaker 2: areas like Virginia. Yet when you look at consumer sentiment
Speaker 2: recent on Friday the Michigan Serve, and you look at
Speaker 2: recent polls, inflation remains.
Speaker 1: Top of vine for American voters.
Speaker 2: How do you get them to potentially look at the
Speaker 2: way you look at how the economy is working well.
Speaker 3: The cost of living in many areas is very high,
Speaker 3: and it is a concern to Americans, and it is
Speaker 3: President Biden's top priceority to do all he can to
Speaker 3: bring down the cost of living. Why I'm here in
Speaker 3: Stafford County though, is it really illustrates one way in
Speaker 3: which that's going to occur. I'm looking at an area
Speaker 3: that has been deprived, has had really no access to
Speaker 3: the Internet at all, sufficiently remote part of Virginia, and
Speaker 3: President Biden has made a commitment that every American household
Speaker 3: and business should have access to the Internet, and funds
Speaker 3: that were included in the American Rescue Plan that was
Speaker 3: passed in twenty twenty one and then later the bipart
Speaker 3: is an Infrastructure Bill provided substantial funding to make sure
Speaker 3: that the Internet is available everywhere and that it's also affordable.
Speaker 3: And what we saw during the pandemic is that access
Speaker 3: to the Internet is critical to education, to jobs, to healthcare,
Speaker 3: and it's really a critical tool that every family needs
Speaker 3: to have access to. And so making that available and
Speaker 3: making sure it's affordable, which is what I'm going to
Speaker 3: be seeing here today. Project that has succeeded in reaching
Speaker 3: about seven hundred households in this area. This is one
Speaker 3: way in which President Biden's working to lower the cost
Speaker 3: of living, but there are many other areas as well.
Speaker 3: Prescription drugs brought down the cost of insulin to thirty
Speaker 3: five dollars a month, working very hard to bring down
Speaker 3: the cost of energy. At the same time, we're protecting
Speaker 3: the environment and bolstering the finances of households by extending
Speaker 3: the child tax credit and an income tax credit.
Speaker 2: If inflation, though, is still top of mind of American
Speaker 2: Americans today, why then tomorrow, or it's likely expected the
Speaker 2: bid administration is going to lift the walls even higher
Speaker 2: when it comes to Chinese goods, why then raised tariffs?
Speaker 3: The President believes that it's critically important for the United
Speaker 3: States to have a role and a presence in strategic
Speaker 3: industries like semiconductors and like clean energy that are going
Speaker 3: to be the foundation of good jobs and national security
Speaker 3: in the decades ahead. He believes it's receptible, as I do,
Speaker 3: to be completely dependent on China in these areas, and
Speaker 3: he wants to make sure, given that China is really
Speaker 3: not playing by the rules in the sense they have
Speaker 3: enormous subsidies in critical areas of advanced manufacturing has resulted
Speaker 3: in over capacity, he wants to make sure that the
Speaker 3: stimulus that's being provided through the Inflation Reduction Act to
Speaker 3: support these industries. And these are industries that are creating
Speaker 3: good manufacturing jobs in parts of the country that have
Speaker 3: been overlooked or have suffered from de industrialization in the past.
Speaker 3: The President wants to make sure that he protects these investments.
Speaker 3: And I don't want to get ahead of the three
Speaker 3: to zero one review on tariffs, but this is a
Speaker 3: commitment that UH President Biden has made and I agree
Speaker 3: with that. I was in China just a couple of
Speaker 3: weeks ago and made clear that we would not allow
Speaker 3: Chinese over capacity to harm our emerging industries.
Speaker 2: Does the US want a trade war though with China?
Speaker 3: We w We believe that we should have a deep
Speaker 3: and productive and that we do in most areas UH
Speaker 3: trade and investment relationship. We're working to stabilize our economic relationship.
Speaker 3: We do not wish to disengage from China economically, but
Speaker 3: we do think that the playing field should be fair,
Speaker 3: and China engages in unfair practices like massive subsidies of
Speaker 3: industries they have decided are critical, and those are cases
Speaker 3: where we will act to protect ourselves.
Speaker 2: We've seen Beijing in the past as though respond and
Speaker 2: it's become tit for tat.
Speaker 1: Are you expecting a response?
Speaker 2: Could they go after Tesla or maybe American farm products?
Speaker 3: Well? President Biden believes that anything we do should be
Speaker 3: targeted to our concerns and not broad based. And hopefully
Speaker 3: we will not see a significant Chinese response, but that's
Speaker 3: always a possibility.
Speaker 1: China is big focus going into the election.
Speaker 2: We hear the former president also talk about he wants
Speaker 2: to put a sixty percent import tariff potential and all
Speaker 2: Chinese goods. He also over the weekend was talking about
Speaker 2: the Trump era tax cuts that are set to expire
Speaker 2: next year. Trump over the weekend said, Biden will give
Speaker 2: you a tax hike. If it was up to Trump,
Speaker 2: it would be a cut on upper middle, lower and
Speaker 2: the business class. Are you envisioning these tax cuts to
Speaker 2: be extended.
Speaker 3: Well, what President Biden has said, and I certainly strongly
Speaker 3: agree with it, is that we want to make sure
Speaker 3: that working families earning under four hundred thousand dollars are
Speaker 3: not faced with the tax hike, but all of the
Speaker 3: wealthy individuals and corporations that benefited from the Tax Cut
Speaker 3: and Jobs Act, where there are provisions that are going
Speaker 3: to expire. The President, for the sake of working families
Speaker 3: and tax fairness, believes that the rich incorporation should pay
Speaker 3: their fair share. And I would say that CBO. The
Speaker 3: Congressional Budget Office recently estimated that extending all of the
Speaker 3: provisions of TCJA would cost five trillion dollars over the
Speaker 3: next decade. And we really do need to be on
Speaker 3: a fiscally sustainable path. The President has already signed and
Speaker 3: put into effect a trillion dollars of deficit reduction over
Speaker 3: the next decade, and he's proposed in his twenty twenty
Speaker 3: five budget in additional three trillion dollars worth of deficit reduction.
Speaker 3: It really is critical that we are in a fiscally
Speaker 3: sustainable path. So TCJA, the bulk of the benefits went
Speaker 3: to the wealthy and to corporations. It blew away the deficit.
Speaker 3: It caused huge increase in the deficit. It promised an
Speaker 3: investment boom, and we didn't see it.
Speaker 2: So should tax revenues be used to lower the deficit? Yes,
Speaker 2: that one for Biden or where they go to social programs?
Speaker 1: Well.
Speaker 3: President Biden believes it's important to invest in areas of
Speaker 3: the economy that will help us grow and create good jobs,
Speaker 3: and his budget is won that proposes helping working families
Speaker 3: and undertaking investments that are critical to our future, but
Speaker 3: also raising taxes on wealthy individuals who he believes they
Speaker 3: are not paying their fair share, and raising taxes on
Speaker 3: corporations that are doing extremely well, and he would both
Speaker 3: invest in America and help working families and lower the deficit.
Speaker 2: The US at the moment is spending just as much
Speaker 2: every year at this point on paying off our debt
Speaker 2: as it is funding our military. Just the usd lower
Speaker 2: interest rates in order to balance the budget.
Speaker 3: Well, we have to take the interest rate path that
Speaker 3: prevails in the economy as given. The President's budget incorporates
Speaker 3: the assumption that interest rates will be in line with
Speaker 3: the projections of private sector forecasters. So there has been
Speaker 3: an increase in the interest rate path that's assumed, and
Speaker 3: it's necessary to make sure that we're in a fiscally
Speaker 3: sustainable path. Of course, the higher interest rate path makes
Speaker 3: that more difficult, but the president's budget would hold I
Speaker 3: see the key metric that summarizes the burden of deficits
Speaker 3: as being its interest cost, and the President's plan would
Speaker 3: hold interest costs at historical levels and not allow them
Speaker 3: to rise above that.
Speaker 2: The federal deficit, though now, is at a level we
Speaker 2: really don't see outside of recessions. Is anyone in Washington
Speaker 2: seriously concerned about this, real conversations about bringing debt back
Speaker 2: to a sustainable path.
Speaker 3: Well, as I said, the interest cost of the debt
Speaker 3: is a good way to measure its burden. Generally, interest
Speaker 3: rates have been lower in spite of recent increases, they
Speaker 3: have been lower than they were in past decades. And
Speaker 3: that means that metrics like the ratio of debt to GDP,
Speaker 3: we can probably manage and have a fiscally sustainable path
Speaker 3: with somewhat higher ratio of debt to GDP. But it's
Speaker 3: important to make sure that the real interest burden of
Speaker 3: the debt, which is a measure of the burden it's
Speaker 3: placing our economy, we have to make sure that that
Speaker 3: stays in historically normal level.
Speaker 2: This isn't just a complain of fiscal hawks either. This
Speaker 2: is a complaint. I heard a lot at the IMF
Speaker 2: World Bank meetings. A lot of countries are lining up
Speaker 2: learned about the path that the US is on and
Speaker 2: what also that means for the US dollar. I hurt
Speaker 2: a lot of people reminiscent of the Nixon times say
Speaker 2: the US it's our currency, but it's your problem, is
Speaker 2: it right? In that context, then that other countries should
Speaker 2: be intervening well.
Speaker 3: Our position is that major countries like those in the
Speaker 3: G seven, and this has been agreed in the G seven,
Speaker 3: should have market determined exchange rates, and if intervention occurs,
Speaker 3: it should be rare, well communicated, and largely to address
Speaker 3: excessive fluctuations in currencies. That's the system that we essentially
Speaker 3: have in place, and I think it's worked well. And
Speaker 3: of course differences in the stance of monetary policy across
Speaker 3: countries is a factor that influences the value of exchange rates.
Speaker 2: I'm sure this is going to come up on your
Speaker 2: next trip. You're going to be meeting with your G
Speaker 2: seven partners in Italy. There have been reports that Japan
Speaker 2: has intervened twice. You've said it should be communicated, it
Speaker 2: should be rare, but they actually haven't worked.
Speaker 1: So why does it matter.
Speaker 3: Well, look, I'm not going to comment on a situation
Speaker 3: in a specific country. I just want to leave it
Speaker 3: as when there is excessive volatility, it's possible for countries
Speaker 3: to intervene. It doesn't always work without more fundamental changes
Speaker 3: in policy, but we believe that should happen very rarely
Speaker 3: and be communicated to trade partners. If it does.
Speaker 2: Just on a final point and in this FX world,
Speaker 2: you're gonna get your G seven partners.
Speaker 1: Do you have a currency pair that you watch the most?
Speaker 3: Watch certainly the value of the dollar visa V major
Speaker 3: currencies like the Euro, the en, the remnant b but
Speaker 3: what your currency developments generally.
Speaker 2: Excellent, Treasure Secretary Janet Yellen, We thank you so much
Speaker 2: for your time. That was, of course US Treasury Secretary
Speaker 2: Janet Yellen in Virginia talking about and highlighting the millions
Speaker 2: of dollars that have come out of the fiscal agenda
Speaker 2: of the Biden administration, and today during this Infrastructure Week,
Speaker 2: it is about expanding broadband in royal areas.