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Speaker 1: Bloomberg Audio Studios, podcasts, radio news for our Bloomberg audiences worldwide.

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Speaker 1: I'm David West, and I'm delighted to welcome now the

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Speaker 1: US Treasure Secretary. He's mister Scott Besson. So, mister Secretary,

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Speaker 1: thank you so much for joining us. Ukraine is at

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Speaker 1: the top of everyone's mind right now and should be

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Speaker 1: the deal that you were the point person on as

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Speaker 1: you went over to Kiev to actually first present it.

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Speaker 1: We all watch what happened in the Oval office. I

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Speaker 1: guess the simple question is can this deal be saved?

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Speaker 2: Well, David, the question is which deal, the peace deal

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Speaker 2: or the economic deal, because clearly it's very difficult to

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Speaker 2: do an economic deal with a leader who doesn't want

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Speaker 2: to do a peace deal. And I will tell you

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Speaker 2: I was sitting three away from President President Zolensky, and

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Speaker 2: this has to be one of the great diplomatic own

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Speaker 2: goals in history.

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Speaker 1: If mister Zelenski called back right now and said I'm sorry,

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Speaker 1: I want to put it back together, what would he

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Speaker 1: have to do.

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Speaker 3: I don't know. Mister Zelenski and his team were.

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Speaker 2: Taken out of the Oval and they kept coming back

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Speaker 2: with that message, and then they were.

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Speaker 3: They left the White House and it's.

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Speaker 2: Going to take a lot of repair, and David the

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Speaker 2: real tragedy here. Maybe things can be repaired with the administration,

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Speaker 2: but I don't know how the American people are going

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Speaker 2: to feel. And more importantly, the economic deal, the meeting today,

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Speaker 2: the real purpose was to show that there was no

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Speaker 2: daylight between the Americans and the Ukrainians. So President Trump's

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Speaker 2: idea was to show that we with the.

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Speaker 3: With the economic deals, to show.

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Speaker 2: That we're more intertwined, and that would be a symbol

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Speaker 2: to the Ukrainian people, to Russian leadership, and to the

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Speaker 2: American people. And President Zelenski blew that up today. I'm

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Speaker 2: not sure what he was thinking.

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Speaker 1: As I say, you were the point person really for

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Speaker 1: the administration on the economic deal. We all thought on

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Speaker 1: the outside we were very close. In fact, I think

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Speaker 1: many of us thought there'd be a signing today, that

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Speaker 1: we'd have some form of economical day. Were we as

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Speaker 1: close as those of the outside thought. Were you surprised?

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Speaker 3: Again?

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Speaker 2: I was shocked, shocked the President Zelensky would come into

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Speaker 2: the Oval office behave like this, speak to the President,

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Speaker 2: speak to the Vice president, but more importantly, disrespect the

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Speaker 2: American people like this. I know he's under a great

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Speaker 2: deal of stress. He and I had a very heated

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Speaker 2: exchange in Kiev. I think the same thing may have

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Speaker 2: happened between him and Vice President Vance and Secretary of

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Speaker 2: Rubio in Munich, and you know, to come in and

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Speaker 2: behave like this was unacceptable. And look, I mean, what

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Speaker 2: better runway? What better runway did he have that President

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Speaker 2: friends Emmanuel McCrone in the Oval on Monday yesterday, we

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Speaker 2: had a fantastic meeting with Prime Minister Kure Stammer from

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Speaker 2: the UK and then President Zelensky today. I mean, you

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Speaker 2: could not have asked for a better arc. And he

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Speaker 2: walked in and I'm not sure what he was thinking.

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Speaker 1: Many of us have been in heated negotiations, not at

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Speaker 1: this level, but still heating negotiations where people pound the table,

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Speaker 1: they may walk out the door and things like that,

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Speaker 1: and it's actually part of the negotiation. Is that what

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Speaker 1: we saw today or was this a more fundamental rupture?

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Speaker 2: David, You don't do a negotiation with the President of

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Speaker 2: the United States in public like this. That we were

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Speaker 2: scheduled to have lunch afterwards, that perhaps he could have

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Speaker 2: brought up some of the points. Instead, he chose to

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Speaker 2: let things go into a downward spiral on worldwide television.

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Speaker 2: And you know, again, I keep coming back to the

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Speaker 2: disrespect of the American people. It was one thing for president.

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Speaker 2: President Zelensky and I had an extended, heated negotiation in Kiev,

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Speaker 2: but we were going to get this economic agreement done.

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Speaker 2: But when you bring it out to the public like this,

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Speaker 2: we'll see if there's any coming back.

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Speaker 1: If there is further negotiation. Do you expect to remain

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Speaker 1: the point person on the economic deal.

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Speaker 2: I expect to be the point person on the economic deal.

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Speaker 2: But ultimately it's going to be up to President Trump

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Speaker 2: whether he thinks that he can continue negotiating with President Zolensky.

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Speaker 1: What is in it for Ukraine the economic deal? Why

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Speaker 1: is it in their best interest to sign this deal?

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Speaker 2: The economic deal is a fantastic deal because that if

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Speaker 2: you think the US is willing to co join its

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Speaker 2: economic interest with Ukraine, and like I said, a very

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Speaker 2: very strong symbol potential for very high returns for Ukrainian people.

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Speaker 2: And again it was meant to be a very strong

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Speaker 2: symbol to Russian leadership that the US and Ukrainian people

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Speaker 2: are more co joined and we have.

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Speaker 3: Economic interest on the ground.

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Speaker 2: Economic security becomes military security. The economy of the Ukraine

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Speaker 2: of Ukraine coming out of this, I thought our deal

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Speaker 2: would have really been an accelerant to the two Ukrainian growth.

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Speaker 2: I mean, you look at Poland next door, and since

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Speaker 2: the Iron Curtain came down. When it came down, Poland

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Speaker 2: and Ukraine had roughly the same size economies. Now Poland

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Speaker 2: before the war started, Poland's was four times larger. So

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Speaker 2: Ukraine has. There's a lot of potential. We'd hope to

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Speaker 2: help unlock it. We'll see whether a deal can be done.

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Speaker 1: Would it be beneficial to Ukraine? Tho I understand why

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Speaker 1: it might have benefit the United States. You've heard some

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Speaker 1: people like Larry Summers said to me, you know, are

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Speaker 1: like Versailles, and except that the Germans were the aggressors

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Speaker 1: of World War One, these are the victims. Why should

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Speaker 1: they give up natural resources? What's wrong with that argument?

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Speaker 2: Well, look, I think professor Summers should comment on things

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Speaker 2: where he has all the facts.

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Speaker 3: And Versailles was debt. This is equity.

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Speaker 2: We get nothing If the Ukrainian people don't get anything,

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Speaker 2: it's when when So there is no debt component here,

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Speaker 2: many of the European wells, or much of the European

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Speaker 2: aid has come in the form of debt. Thus far

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Speaker 2: Us is put in grants and this is not debt.

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Speaker 2: If it were debt, the Ukrainian bonds would not have

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Speaker 2: been going up on the deal.

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Speaker 3: So I think the.

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Speaker 2: Mister Summers, Professor Summers should maybe call me and ask

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Speaker 2: for the details before commenting. Maybe it's a nice media

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Speaker 2: line that it's versi, but it's just not the truth.

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Speaker 1: You also have some other responsibilities besides trying to get

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Speaker 1: an economic deal in Ukraine. Let's talk a little bit

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Speaker 1: of the economy, and specifically you and I have talked before.

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Speaker 1: You have as a goal, as I recall, getting the

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Speaker 1: deficit down to three percent of GDP the United States

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Speaker 1: saying it's going to take a little time to do it,

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Speaker 1: not right away. What role does revenue from tariff's play

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Speaker 1: in your spreadsheet when you look at getting to that

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Speaker 1: three percent number.

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Speaker 3: Good.

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Speaker 2: That's a great question because that over the coming weeks months,

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Speaker 2: as we put the budget together, your viewers are going

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Speaker 2: to see lots of different nomenclature. There's CBO scoring, and

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Speaker 2: CBO scoring will likely not include any tariff income, and

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Speaker 2: so much of the tariff income could be substantial. We

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Speaker 2: will see where the tariffs finally end up. The China tariffs,

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Speaker 2: since they were put on, have brought in substantial revenue.

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Speaker 2: They continue to bring in substantial revenue. President Trump has

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Speaker 2: talked about reciprocal tariffs. If tariffs are his favorite word,

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Speaker 2: I would say reciprocal has gotten to be his second

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Speaker 2: favorite word. And in the reciprocal tariffs, you actually don't

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Speaker 2: know the path of what's going to happen, David, because

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Speaker 2: the idea there is that if Europe has a twelve

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Speaker 2: and a half percent tax on our cars, we could

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Speaker 2: either put a twelve and a half percent tax on

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Speaker 2: theirs or the terroffs could get dropped altogether. So it's

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Speaker 2: going to be very path dependent. But I would expect

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Speaker 2: that with the tenure scoring that the CBO likes to use,

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Speaker 2: that there could be substantial tariff income over the next

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Speaker 2: ten years.

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Speaker 1: When we look at tariffs, there's a lot of different

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Speaker 1: things being talked about, proposed, threatened, even imposed. One of

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Speaker 1: those Mexico, which comes up next week. Is it important

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Speaker 1: to get the revenue from the Mexico tariffs because I

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Speaker 1: know Mexico is sort of moving it appears right now.

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Speaker 1: For example, the respect to tariffs on things coming into

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Speaker 1: Mexico from China. Can they get out off the hook

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Speaker 1: on tariffs?

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Speaker 2: So the tariff negotiation isn't under the purview of Treasury,

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Speaker 2: it's a ustr US Trade Representative and Commerce, So I'm

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Speaker 2: going to leave that question to them. I do think

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Speaker 2: one very interesting proposal that the Mexican government has made

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Speaker 2: is perhaps matching the US.

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Speaker 3: On our China tariffs.

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Speaker 2: I think it would be a nice gesture if the

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Speaker 2: Canadians did it also, so in a way we could

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Speaker 2: have fortress North America from the flood of can from

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Speaker 2: the flood of Chinese imports. That's coming out of the

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Speaker 2: most unbalanced economy in the history of modern times.

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Speaker 1: Another one of the goals I think we've talked about

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Speaker 1: is three percent and growth. Again, I'm not saying you're

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Speaker 1: going to go right away, but that's the goal ultimately,

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Speaker 1: as I understand it, we have some people now starting

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Speaker 1: to say the indications about a coming recession are going up,

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Speaker 1: including Torst and Slock from Apollo, somebody you know who

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Speaker 1: came out with a note today saying the probabilities of

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Speaker 1: a recession are going up? Is that what your number show.

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Speaker 3: You, David, It's early.

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Speaker 2: I do think that we're seeing kind of the hangover

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Speaker 2: from this excess spending in the Biden.

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Speaker 3: The Biden four years. And what we are going.

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Speaker 2: To do now is something that I've talked about several

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Speaker 2: times on your show in the past. We're going to

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Speaker 2: reprivatize the economy and as we bring down government spending

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Speaker 2: and get the private sector moving again. That may not

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Speaker 2: be a perfect one to one ratio, but I'm sure

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Speaker 2: it's going to happen. President Trump said the other day

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Speaker 2: someone said, well, when does it become your economy? He said,

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Speaker 2: probably six or twelve months out. I think I would

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Speaker 2: agree with that.

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Speaker 1: We also are seeing some numbers, some sentiment numbers. The

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Speaker 1: consumer sentiment indicates that inflation expectations are rising. Now that's

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Speaker 1: not necessarily the hard numbers. We're not necessarily seeing it in

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Speaker 1: consumer spending, yet, sooner or later those have come into Think,

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Speaker 1: what do you think the American people get wrong as

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Speaker 1: they anticipate more inflation.

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Speaker 2: Well, I think, look, I'm not going to question the

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Speaker 2: American people's current conditions because we're still living through this

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Speaker 2: Biden inflation. I think that over the next six and

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Speaker 2: twelve months that as we deregulate, drill more American energy,

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Speaker 2: and establish our energy program, and then make the twenty

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Speaker 2: seventeen tax cuts and job back permanent, gets some certainty

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Speaker 2: that I think that we could very quickly go back

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Speaker 2: to the federal reserve target of two point zero percent.

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Speaker 1: We've also talked about the tenure, and you've indicated that

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Speaker 1: the yield on the tenure is an important indicator for

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Speaker 1: you that's on your dashboard as you assess how well

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Speaker 1: the economic plan is doing. It's gone down to four

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Speaker 1: point two from four point four since the election, but

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Speaker 1: it's still at four point two. Do you have a

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Speaker 1: sense of it? And I'm not asking for a specific number,

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Speaker 1: but a range that would indicate this economic policy is working.

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Speaker 3: Well.

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Speaker 2: David, Again, it's going to depend on how quickly the

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Speaker 2: inflation drops, what the growth level is, but I would

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Speaker 2: say that I believe interestrates have come down more than

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Speaker 2: twenty basis points or twenty something since the election. And

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Speaker 2: the other thing that's important is mortgage rates have come

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Speaker 2: down and the spread on mortgages versus treasuries have come

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Speaker 2: down since November, which I think is indicative of some

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Speaker 2: of the things that we're going to do on financial deregulation.

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Speaker 2: So the housing market is stuck now, but I would

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Speaker 2: expect that at the housing market sometime in the next

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Speaker 2: few weeks is going to unfreeze. The other thing on

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Speaker 2: the economy here is I am having been in the

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Speaker 2: investment business for thirty five years, I'm used to anomalies,

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Speaker 2: and we've got a lot of anomalies going here, whether

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Speaker 2: it was the tragic fires on California, the cold weather

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Speaker 2: in the Northeast, So we're not really looking at kind

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Speaker 2: of comparable data. Also, there's been a big jump in

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Speaker 2: import data or the level of imports in the economic data,

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Speaker 2: and some of that may be manufacturers or consumers pre

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Speaker 2: stocking and anticipation of anticipated terraffs.

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Speaker 1: Again, if you're looking at the yield in the Chine,

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Speaker 1: I'm curious about what levers you have as Sexuary Treasury

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Speaker 1: to pull or push. To the fact that you've mentioned

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Speaker 1: financial regulation and deregulation. What about the tax bill, where

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Speaker 1: are we on that, What will that do to the

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Speaker 1: yield on the tenure and what of the likelihood of

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Speaker 1: the game passed.

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Speaker 2: Look, I think we're passed fail on the tax bill.

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Speaker 2: In terms of we are we're going to pass, we

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Speaker 2: are going to get it pass.

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Speaker 3: We started this week.

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Speaker 2: I lead something that's called the Big Six, So the

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Speaker 2: Treasury Secretary Kevin Has, the Chair of the National Economic Council,

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Speaker 2: Senator's Leader Thoon ranking Member or the Chair of the

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Speaker 2: Finance Committee, Senator Crapo, Speaker Johnson, and Jason Smith, who

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Speaker 2: the chairs the House Committee. So the six of us

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Speaker 2: have started working on the bills. They're going into reconciliation.

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Speaker 2: So I'm quite optimistic on the progress they're making. The

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Speaker 2: House had a very close vote, but Speaker Johnson got

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Speaker 2: it over the line, and again I think that's certainty

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Speaker 2: will help establish the parameters. And then again it's the

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Speaker 2: whole the deregulatory agenda and the getting energy prices down,

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Speaker 2: so I think we could go back to target pretty quickly.

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Speaker 2: And you know, on the other on the they just

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Speaker 2: for a minute. On the on the other side, what

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Speaker 2: we're not getting any credit for yet that I'm very

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Speaker 2: optimistic about is the Department of Government efficiency that I

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Speaker 2: think that there are substantial savings to be found here

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Speaker 2: and there's a lot.

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Speaker 3: Of low hanging fruit.

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Speaker 2: I don't know what the number is, but that that's

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Speaker 2: a pretty good story.

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Speaker 3: So back to if we can keep.

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Speaker 2: Growth, get growth up through deregulation and permanency in the

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Speaker 2: tax cuts, and then cut spending. Because from the first

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Speaker 2: time I was on your show, we talked about this

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Speaker 2: blowout government deficit, so we've got to get that down.

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Speaker 1: Well, let's talk about actually doge doge and how material

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Speaker 1: that is in your competition?

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Speaker 3: Three percent.

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Speaker 1: I understand you don't have a specific number, but will

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Speaker 1: it be material because it is a very big budget,

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Speaker 1: you have to take a lot of money after the

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Speaker 1: spending side to really make a material difference in that

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Speaker 1: deficit as a percentage of GDP.

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Speaker 2: Well, David, I think we can make a pretty big

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Speaker 2: hit here. And the way to think about it is

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Speaker 2: every three hundred billion is one percent of GDP. So

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Speaker 2: is there three hundred billion of savings there? Maybe is

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Speaker 2: there one hundred and fifty, But everything starts moving us

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Speaker 2: back toward the target, and were determined to get this down.

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Speaker 2: President Trump at the cabinet meeting talked about balancing the budget.

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Speaker 2: He asked me, how soon can we do that? And

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Speaker 2: we'll see, But I do suspect in terms of waste, fraud,

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Speaker 2: and abuse. I think most of us think in terms

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Speaker 2: of waste and abuse. I got to tell you that

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Speaker 2: I'm slightly shocked at some of the fraud we're finding,

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Speaker 2: and you're going to be hearing about more of that

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Speaker 2: over the next couple of weeks.

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Speaker 1: And finally, mister Secretary, when you went into this job,

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Speaker 1: you had some specific goals of things you saw you

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Speaker 1: get a complaghed like three percent growth, like getting the

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Speaker 1: deficit dout of three percent of GDP. Now that you're

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Speaker 1: inside and you've actually seen it from the inside, are

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Speaker 1: you optimistic about making those numbers? And what's the biggest

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Speaker 1: risk to that?

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Speaker 2: Look, it's execution, and we go out every day we

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Speaker 2: try to we have our goals. As we said, We've

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Speaker 2: recentered on the tenure, which is for capital formation for mortgages.

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Speaker 2: We are working on the budget deal, we are working

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Speaker 2: on substantial deregulation. We're working on the President's policy of

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Speaker 2: energy dominance. And if we get all those done, I

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Speaker 2: think that it'll be easily achievable. But David, actually I'll

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Speaker 2: take back the word easily. What I am learning in

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Speaker 2: Washington is nothing's easy, but everything's possible.

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Speaker 1: Okay, thank you so much, mister secretary. Really great to

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Speaker 1: talk to you. That's the United States Treasure Secretary, Scott Bessen.