Bloomberg Audio Studios, podcasts, radio news for our Bloomberg audiences worldwide. I'm David West, and I'm delighted to welcome now the US Treasure Secretary. He's mister Scott Besson. So, mister Secretary, thank you so much for joining us. Ukraine is at the top of everyone's mind right now and should be the deal that you were the point person on as you went over to Kiev to actually first present it.
We all watch what happened in the Oval office. I guess the simple question is can this deal be saved?
Well, David, the question is which deal, the peace deal or the economic deal, because clearly it's very difficult to do an economic deal with a leader who doesn't want to do a peace deal. And I will tell you I was sitting three away from President President Zolensky, and this has to be one of the great diplomatic own goals in history.
If mister Zelenski called back right now and said I'm sorry, I want to put it back together, what would he have to do.
I don't know. Mister Zelenski and his team were.
Taken out of the Oval and they kept coming back with that message, and then they were.
They left the White House and it's.
Going to take a lot of repair, and David the real tragedy here. Maybe things can be repaired with the administration, but I don't know how the American people are going to feel. And more importantly, the economic deal, the meeting today, the real purpose was to show that there was no daylight between the Americans and the Ukrainians. So President Trump's idea was to show that we with the.
With the economic deals, to show.
That we're more intertwined, and that would be a symbol to the Ukrainian people, to Russian leadership, and to the American people. And President Zelenski blew that up today. I'm not sure what he was thinking.
As I say, you were the point person really for the administration on the economic deal. We all thought on the outside we were very close. In fact, I think many of us thought there'd be a signing today, that we'd have some form of economical day. Were we as close as those of the outside thought. Were you surprised?
Again?
I was shocked, shocked the President Zelensky would come into the Oval office behave like this, speak to the President, speak to the Vice president, but more importantly, disrespect the American people like this. I know he's under a great deal of stress. He and I had a very heated exchange in Kiev. I think the same thing may have happened between him and Vice President Vance and Secretary of Rubio in Munich, and you know, to come in and behave like this was unacceptable. And look, I mean, what
better runway? What better runway did he have that President friends Emmanuel McCrone in the Oval on Monday yesterday, we had a fantastic meeting with Prime Minister Kure Stammer from the UK and then President Zelensky today. I mean, you could not have asked for a better arc. And he walked in and I'm not sure what he was thinking.
Many of us have been in heated negotiations, not at this level, but still heating negotiations where people pound the table, they may walk out the door and things like that, and it's actually part of the negotiation. Is that what we saw today or was this a more fundamental rupture?
David, You don't do a negotiation with the President of the United States in public like this. That we were scheduled to have lunch afterwards, that perhaps he could have brought up some of the points. Instead, he chose to let things go into a downward spiral on worldwide television. And you know, again, I keep coming back to the disrespect of the American people. It was one thing for president.
President Zelensky and I had an extended, heated negotiation in Kiev, but we were going to get this economic agreement done. But when you bring it out to the public like this, we'll see if there's any coming back.
If there is further negotiation. Do you expect to remain the point person on the economic deal.
I expect to be the point person on the economic deal. But ultimately it's going to be up to President Trump whether he thinks that he can continue negotiating with President Zolensky.
What is in it for Ukraine the economic deal? Why is it in their best interest to sign this deal?
The economic deal is a fantastic deal because that if you think the US is willing to co join its economic interest with Ukraine, and like I said, a very very strong symbol potential for very high returns for Ukrainian people. And again it was meant to be a very strong symbol to Russian leadership that the US and Ukrainian people are more co joined and we have.
Economic interest on the ground.
Economic security becomes military security. The economy of the Ukraine of Ukraine coming out of this, I thought our deal would have really been an accelerant to the two Ukrainian growth. I mean, you look at Poland next door, and since the Iron Curtain came down. When it came down, Poland and Ukraine had roughly the same size economies. Now Poland before the war started, Poland's was four times larger. So Ukraine has. There's a lot of potential. We'd hope to
help unlock it. We'll see whether a deal can be done.
Would it be beneficial to Ukraine? Tho I understand why it might have benefit the United States. You've heard some people like Larry Summers said to me, you know, are like Versailles, and except that the Germans were the aggressors of World War One, these are the victims. Why should they give up natural resources? What's wrong with that argument?
Well, look, I think professor Summers should comment on things where he has all the facts.
And Versailles was debt. This is equity.
We get nothing If the Ukrainian people don't get anything, it's when when So there is no debt component here, many of the European wells, or much of the European aid has come in the form of debt. Thus far Us is put in grants and this is not debt. If it were debt, the Ukrainian bonds would not have been going up on the deal.
So I think the.
Mister Summers, Professor Summers should maybe call me and ask for the details before commenting. Maybe it's a nice media line that it's versi, but it's just not the truth.
You also have some other responsibilities besides trying to get an economic deal in Ukraine. Let's talk a little bit of the economy, and specifically you and I have talked before. You have as a goal, as I recall, getting the deficit down to three percent of GDP the United States saying it's going to take a little time to do it, not right away. What role does revenue from tariff's play in your spreadsheet when you look at getting to that three percent number.
Good.
That's a great question because that over the coming weeks months, as we put the budget together, your viewers are going to see lots of different nomenclature. There's CBO scoring, and CBO scoring will likely not include any tariff income, and so much of the tariff income could be substantial. We will see where the tariffs finally end up. The China tariffs, since they were put on, have brought in substantial revenue. They continue to bring in substantial revenue. President Trump has
talked about reciprocal tariffs. If tariffs are his favorite word, I would say reciprocal has gotten to be his second favorite word. And in the reciprocal tariffs, you actually don't know the path of what's going to happen, David, because the idea there is that if Europe has a twelve and a half percent tax on our cars, we could either put a twelve and a half percent tax on theirs or the terroffs could get dropped altogether. So it's
going to be very path dependent. But I would expect that with the tenure scoring that the CBO likes to use, that there could be substantial tariff income over the next ten years.
When we look at tariffs, there's a lot of different things being talked about, proposed, threatened, even imposed. One of those Mexico, which comes up next week. Is it important to get the revenue from the Mexico tariffs because I know Mexico is sort of moving it appears right now. For example, the respect to tariffs on things coming into Mexico from China. Can they get out off the hook on tariffs?
So the tariff negotiation isn't under the purview of Treasury, it's a ustr US Trade Representative and Commerce, So I'm going to leave that question to them. I do think one very interesting proposal that the Mexican government has made is perhaps matching the US.
On our China tariffs.
I think it would be a nice gesture if the Canadians did it also, so in a way we could have fortress North America from the flood of can from the flood of Chinese imports. That's coming out of the most unbalanced economy in the history of modern times.
Another one of the goals I think we've talked about is three percent and growth. Again, I'm not saying you're going to go right away, but that's the goal ultimately, as I understand it, we have some people now starting to say the indications about a coming recession are going up, including Torst and Slock from Apollo, somebody you know who came out with a note today saying the probabilities of a recession are going up? Is that what your number show.
You, David, It's early.
I do think that we're seeing kind of the hangover from this excess spending in the Biden.
The Biden four years. And what we are going.
To do now is something that I've talked about several times on your show in the past. We're going to reprivatize the economy and as we bring down government spending and get the private sector moving again. That may not be a perfect one to one ratio, but I'm sure it's going to happen. President Trump said the other day someone said, well, when does it become your economy? He said, probably six or twelve months out. I think I would agree with that.
We also are seeing some numbers, some sentiment numbers. The consumer sentiment indicates that inflation expectations are rising. Now that's not necessarily the hard numbers. We're not necessarily seeing it in consumer spending, yet, sooner or later those have come into Think, what do you think the American people get wrong as they anticipate more inflation.
Well, I think, look, I'm not going to question the American people's current conditions because we're still living through this Biden inflation. I think that over the next six and twelve months that as we deregulate, drill more American energy, and establish our energy program, and then make the twenty seventeen tax cuts and job back permanent, gets some certainty that I think that we could very quickly go back to the federal reserve target of two point zero percent.
We've also talked about the tenure, and you've indicated that the yield on the tenure is an important indicator for you that's on your dashboard as you assess how well the economic plan is doing. It's gone down to four point two from four point four since the election, but it's still at four point two. Do you have a sense of it? And I'm not asking for a specific number, but a range that would indicate this economic policy is working.
Well.
David, Again, it's going to depend on how quickly the inflation drops, what the growth level is, but I would say that I believe interestrates have come down more than twenty basis points or twenty something since the election. And the other thing that's important is mortgage rates have come down and the spread on mortgages versus treasuries have come down since November, which I think is indicative of some of the things that we're going to do on financial deregulation.
So the housing market is stuck now, but I would expect that at the housing market sometime in the next few weeks is going to unfreeze. The other thing on the economy here is I am having been in the investment business for thirty five years, I'm used to anomalies, and we've got a lot of anomalies going here, whether it was the tragic fires on California, the cold weather in the Northeast, So we're not really looking at kind
of comparable data. Also, there's been a big jump in import data or the level of imports in the economic data, and some of that may be manufacturers or consumers pre stocking and anticipation of anticipated terraffs.
Again, if you're looking at the yield in the Chine, I'm curious about what levers you have as Sexuary Treasury to pull or push. To the fact that you've mentioned financial regulation and deregulation. What about the tax bill, where are we on that, What will that do to the yield on the tenure and what of the likelihood of the game passed.
Look, I think we're passed fail on the tax bill. In terms of we are we're going to pass, we are going to get it pass.
We started this week.
I lead something that's called the Big Six, So the Treasury Secretary Kevin Has, the Chair of the National Economic Council, Senator's Leader Thoon ranking Member or the Chair of the Finance Committee, Senator Crapo, Speaker Johnson, and Jason Smith, who the chairs the House Committee. So the six of us have started working on the bills. They're going into reconciliation.
So I'm quite optimistic on the progress they're making. The House had a very close vote, but Speaker Johnson got it over the line, and again I think that's certainty will help establish the parameters. And then again it's the whole the deregulatory agenda and the getting energy prices down, so I think we could go back to target pretty quickly. And you know, on the other on the they just
for a minute. On the on the other side, what we're not getting any credit for yet that I'm very optimistic about is the Department of Government efficiency that I think that there are substantial savings to be found here and there's a lot.
Of low hanging fruit.
I don't know what the number is, but that that's a pretty good story.
So back to if we can keep.
Growth, get growth up through deregulation and permanency in the tax cuts, and then cut spending. Because from the first time I was on your show, we talked about this blowout government deficit, so we've got to get that down.
Well, let's talk about actually doge doge and how material that is in your competition?
Three percent.
I understand you don't have a specific number, but will it be material because it is a very big budget, you have to take a lot of money after the spending side to really make a material difference in that deficit as a percentage of GDP.
Well, David, I think we can make a pretty big hit here. And the way to think about it is every three hundred billion is one percent of GDP. So is there three hundred billion of savings there? Maybe is there one hundred and fifty, But everything starts moving us back toward the target, and were determined to get this down. President Trump at the cabinet meeting talked about balancing the budget. He asked me, how soon can we do that? And we'll see, But I do suspect in terms of waste, fraud,
and abuse. I think most of us think in terms of waste and abuse. I got to tell you that I'm slightly shocked at some of the fraud we're finding, and you're going to be hearing about more of that over the next couple of weeks.
And finally, mister Secretary, when you went into this job, you had some specific goals of things you saw you get a complaghed like three percent growth, like getting the deficit dout of three percent of GDP. Now that you're inside and you've actually seen it from the inside, are you optimistic about making those numbers? And what's the biggest risk to that?
Look, it's execution, and we go out every day we try to we have our goals. As we said, We've recentered on the tenure, which is for capital formation for mortgages. We are working on the budget deal, we are working on substantial deregulation. We're working on the President's policy of energy dominance. And if we get all those done, I think that it'll be easily achievable. But David, actually I'll
take back the word easily. What I am learning in Washington is nothing's easy, but everything's possible.
Okay, thank you so much, mister secretary. Really great to talk to you. That's the United States Treasure Secretary, Scott Bessen.