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