华盛顿支出与腐败的惊人真相——Scott Bessent

Okay, we are here in Washington DC in front of the White House having spent the afternoon with our friend David Saxs, our friend Elon Musk and others. We are here to learn about the debt, the deficit, what's going on in DC. And we have an incredible interview lined up with Scott Bessant, Treasury Secretary of the United States. It was amazing and it's been an amazing afternoon and we're really looking forward to it. It was amazing. Well, this is the pre the intro to the video. It will be amazing. It's not the pre. Let's just What the We're going to pretend it's the pre. It was amazing. It It will be incredible. It was incredible. But how cool is the White House? And here's a bell. I'm pretty sure I'm pretty sure the bell I cannot even describe to you the day we had running around. It's incredible. Running around room to room in the White House. One of the best days of my life. It was one of the best days of my life. It was incredible. Incredible. I think this bell is probably pretty important. Can you guys get a shot of this bell? I don't know what it is, but it's really important. Yeah. The White House, the people to a one super kind, super open, super curious. I mean, did you felt it? I You felt accepted. Yeah, I felt But I got free soda. They have a soda machine where you can make any Coca-Cola flavor you want in the White House. It was pretty cool. I took some uh hummus. I wrapped it on Creeper's face. I punched him in. It was a cool afternoon. And uh this is what is this? The east wing of the White House. And we took a walk from the west wing all the way over to the east wing to the portico. And then we we snuck in. Well, we didn't sneak in. We walked in. And then we're walking around the east wing. We went to all of the private rooms. I got great photos. We'll we'll we'll slice him into this video. And then some secret service dude comes up and he's like, "What are you guys What are you doing here? This is the residence of the president. You have to get the out." He's like, "You need to go downstairs now." So, we got kicked the [ __ ] out. But it was an incredible um incredible tour. Super great. Yeah. Anyway, we're excited for this interview with Scott Bess and hope you enjoy it. All right, besties. I think that was another epic discussion. People love the interviews. I could hear him talk for hours. Absolutely. We crush your questions in a minute. We are giving people ground truth data to underwrite your own opinion. What do you guys think? That was fun.

Well, today's a really important day. We're joined by the 79th Secretary of the Treasury, Scott Bessent, and this is an opportunity to explain to people not just how the economy works, but in a little bit more detail where we are in this moment in time: where we are with deficits, tariffs, the budget, and economic, monetary, and fiscal policy. How do we make sure that we all understand the plan to make America great again? So, Scott, thank you for joining us.

Good. Thanks for having me.

I actually want to start by going back in the way-back machine. South Carolina—your father was a real estate developer. Tell us where the passion for finance came from.

Well, I don't know where finance in particular came from. As you mentioned, my dad was a real estate developer, and he was kind of a boom-bust kind of guy. So, I think that's where my passion for risk management came from.

But I was very fortunate. I went to Yale and wasn't sure what I wanted to do in 1980 when I got there. Probably you all can imagine this, but there used to be these things called punch cards, and the Yale computer system had just gone from punch cards to screens. I was thinking of becoming a computer science major, maybe a journalist, because people actually used to read newspapers. Punch cards and newspapers from the way-back machine.

I got an internship with an individual, and he taught me the investment business really well.

And who was that?

His name is Jim Rogers. He's famous; he was George Soros's first partner. He had just completed an around-the-world motorcycle trip and written a book called Investment Biker. He was a fascinating guy.

I got into the investment business, and I thought, “This is really what I like,” because it's quantitative, so I get to use my quantitative skills, but you're also constructing a narrative. It's also about human emotions.

And you were trading equities, bonds—everything, including currencies?

Well, I started out with equities, and I did that for several years. Then I ended up at Soros Fund Management. I worked for a fellow who was my mentor, Stanley Druckenmiller, who's incredible. I think he's been at it for more than 40 years now, with never a down year.

He's notorious for going all-in several times in his career.

All in? All in.

And only when he's right. But he is the best at changing his mind of anyone I've ever seen.

That's right.

Druckenmiller has that famous adage: “Invest, then investigate.” He has several, and I'm trying to get him to write a book because he has so many of these great things. Maybe you will press him. “It takes courage to be a pig.”

I was hooked on markets because, again, it was everything. It was quantitative, it was qualitative, and it's real-time. You get real-time feedback all the time. You could have a long-term view, but then you're trying to gauge the short term against that. I loved it.

For 35 years, I've done what's called macro investing. Eventually, I was trading currencies, bonds, commodities, equities, and some credit, and I got to travel around the world meeting leaders and trying to figure out what the next move was in policy.

I think this is important because I've spoken with folks who trade in macro, and a big part of the role of being a macro investor, a macro trader, is really knowing where central bank action is going to be, really knowing how government bonds are going to move, and spending time with economists—not just at central banks, but around the world—and learning a little bit about how capital is flowing all over the world. Is that the right way to describe the role of being a macro investor, just for folks?

Yeah, it's a lot of that. There's another great macro investor called Bruce Kovner, and he had this saying: “I succeeded because I could imagine a different future and believe it could happen.” So, the key is to believe it could happen and then manage the risk.

Could you imagine what would happen if the Iron Curtain came down? What would happen? I mean, you all do it as venture capitalists, but how could the world live in a different state?

Let's hold that idea and double-click for us to 1992. It's probably one of the most famous moments in the broader world of macro trading. This is really where you, Druckenmiller, and Soros basically broke the back of the Bank of England. It's an interesting window into assessing all of these things. Can you give us the conditions on the ground at that moment and what new reality you saw in England? Then it would be great to contrast and compare that to America today.

It's a great historical example, and it also kind of brings in 3 dimensions. I was the analyst, Stan was the portfolio manager, and then, in a way, George was the risk manager.

I was running the UK office. I was on the ground in the UK, and I had this light-bulb go off. I thought the fulcrum point, or my differentiated view, was that the UK had just had a big housing boom. UK mortgages at that time weren't long-term mortgages; they were all floating-rate mortgages. So, if the Bank of England raised rates on a Wednesday, your mortgage went up on a Friday.

The UK had hooked into something called the Exchange Rate Mechanism. They had to balance against the Deutsche mark; they had to stay within a band. I thought that if they raised rates to try to stay in the band and protect the currency, it would be unsustainable because British homeowners would be bankrupted.

Stan's great feat of analysis was figuring out that these bands set up this incredible asymmetric bet: I could push them up against one side of the band, and their mandate was just to push me back to the other side, so we'd just lose 2.5%.

We pushed them against one side of the band. The Bank of England and the British government had to buy an unlimited amount of pounds, and they started raising interest rates. This was September of 1992, and eventually they just weren't able to sustain the pressure from the high rates. They came out, and then the asymmetric risk-reward was that we made about 20-something percent in a day.

Back to what was really Stan's genius: I don't know if either of you play backgammon, but in backgammon there's the move after the move. We'd made all that money and were kind of euphoric: “Okay, now what?” because there's going to be the trade after the trade. We made that much in a day, but then it was actually the trade after the trade. This isn't well publicized, but I think we made another 20% during the rest of the year.

So, in that moment, what you're really observing is that the real economy is somewhat dislocated—maybe meaningfully dislocated—from the financial economy.

And I think you've said this now many times, and you've basically used the terminology, the Main Street–Wall Street dichotomy. How do you observe the moment in 2025, maybe what rhymes with the early '90s or other periods where you've been trading actively?

Well, look, I think it goes back to something that's unsustainable is unsustainable. One of the reasons I'm sitting here now is that, about 18 months ago, I went to see President Trump. I'd known the Trump family for 30 years. I'd never known the president that well, but I went to tell him that I wanted to get involved in the campaign because I was so alarmed by what the Biden administration was doing with the debt and deficit: endless stimulus, endless spending, but endless spending when we were in solid economic territory and not in a war. First time ever.

I thought it was very cynical because I actually thought, well, we're going to spend, spend, spend, and then there'll be no choice but to raise taxes. So you'd go into this equilibrium that you could just never get out of, and you become kind of a European-style social democracy—the malaise.

I also think that we're very cynical on immigration, right? Because if you take the kind of stated number, 12 million—the president's number, 22 million—I don't know what the truth is. I kind of lean toward the president. But it was, “Oh, we're going to let all these people cross the border. The problem's too big to make them go home.”

But I like to stay in my finance lane. The finance lane was, we're going to just go to the point of no return and kind of inflict these progressive financial values on the country. There'll be no way out. There was very meaningful wage suppression in that period, and you had an equity market that was incredibly well bid just because the money supply was always there.

Well, it was always there, and you had these distributional aspects because, back to your question, Wall Street versus Main Street—it was driving me crazy when Vice President Harris said, “I'm going to fight for the middle class,” when these policies, inadvertent or intentional, had eviscerated the middle class and really the bottom 50%.

So we're in this situation because purchasing power goes down and inflation goes up. That's really important. I think people don't understand this: If you had stocks, if you had assets, your assets inflated. But if you didn't, the cost of everything inflated, and you didn't have the ability to purchase because your wages don't go up.

And not only did inflation go up, but Jason Trennert has this thing—I think he calls it the Everyman Index. CPI went up about 22% during the period, but the Everyman Index was up over 30%, 35%. The bottom 25%, the bottom 50% of wage earners, have a different basket than we do, and it inflated much faster: used-car prices, car insurance, rent, groceries. Not only is it unfair, but it's unstable and creates great civil and societal issues.

As you guys got into looking at this—I remember talking about this in the summer of '23, I think it was—what was the point of view on what should have been done at that point in time? And then how much farther did it go? How much longer did it last?

Well, I think what happened is, the Democrats will tell you that the big spending bills were needed for rescue. I would say in March of '21, the economy didn't need rescue; it was already in recovery, right? So these were rescue-size packages.

Even Larry Summers—I remember there was a great debate between Larry Summers and Paul Krugman—and Summers, I think, said, “Look, this is at least $900 billion, a trillion too much.” The Federal Reserve was very slow off the mark in the summer of '22.

And again, imagine: The top 10% has assets, the stock market is flying. You're in the bottom 50%; you have no assets, but you have debt. Your credit cards are up, and mortgages make it impossible to buy a house. House prices had gone through the roof due to COVID. So it really did end the American dream, and we've been suffering these distributional effects.

Scott, what is the American dream today, do you think?

Look, I think the American dream is what it's always been. But after World War II, I think 90% of American families had children who made more than the parents. Now I think it's 50/50. It's to own a home. It's financial security. It's some level of comfort. It's purpose in your work. It's being able to support your family and have choices, and not having to work 2 jobs.

I made a remark at the Economic Club of New York 2 weeks ago, and Mike Pence decided he was going to troll me because I said, “The American dream is not built on cheap goods,” right? And he said, “Well, yes, it is.”

I just said, “Vice President Pence, this ‘let them eat flat-screens’ economic policy isn't what people want. They don't want the baubles from China. They want progression. People want progression.”

I remember reading—Jonathan Haidt had some work on this a long time ago—that happiness is measured by your change in net worth or income per year. It doesn't matter what your absolute levels are, by all these socioeconomic surveys that they do. That feeling like you're making some progression in life is what folks are looking for.

I wonder whether, in solving for that, we created a system—and I'd love your point of view, your read on this—where we said everyone should own a home. That's the American dream. In order to do that, people put most of their net worth into a home. 60%, I think, of middle-class net worth is tied up in a single asset.

Then, in order to get them to feel like they're progressing, we've created a system of loans and a system of economic and fiscal policy that ultimately drives the value of the home up every year. Now we're kind of in an unsustainable housing bubble. Most people can't even afford to buy a home. What did we get wrong there, and how does that affect what the American dream should look like going forward?

Well, I think a lot of it is scarcity, because what you're talking about is, like, out in San Francisco, super-tight zoning laws. So there's scarcity for homes.

If you think about Ivy League education, all of a sudden you gave all these people access to Ivy League educations. You brought in international students, but the number of degrees awarded at Harvard, Yale, and Princeton probably hasn't changed very much since the 1950s. So you created just this demand for scarce things, which leads to this anxiety.

But you also created, I think, a sense of hopelessness, because you're thinking, “I can't access it. I will never get it. I will never be able to pay down my student loan. I will never be able to afford a home. I can never see my income growing to give me access there.”

So is that a deregulatory solution?

Well, I think the first part of it is that it's a data problem. The one thing that struck me about this Trump 2.0 administration is that I think you have a better beat on the fact that this data is not as reliable as other administrations would say it was in order to do whatever it is they wanted to do anyway. It's sort of like, let me just find the data that justifies what my action is.

Part of why you can't tell this story is, do you trust the GDP numbers? Do you trust nonfarm payrolls? Do you think these are reliable enough for you to act on behalf of the United States? No. Look, they're subject to big revisions over time.

One of the big mistakes the Biden administration made—and thank goodness they made it—was that they went with the numbers, not what the American people were feeling. They said, “No, it's a vibecession, and you really don't understand how good you have it. This has happened. This has happened.”

In reality, I was on Meet the Press yesterday, and there was something that said, “Well, the American people don't believe Donald Trump's doing enough on the economy.” I told the host, “You know, the one thing I'm not going to answer is that they don't know what they're talking about. I have to have respect for how they feel, and then we need to go back and look at what is causing this anxiety.” So that's what we're going to do.

Let's peel the onion back. What do you think is causing this anxiety? Where are the levers that maybe the federal government can control in releasing some of the pressure? And what are more market functions that just need to clear up some of these dislocations?

Well, look, I think we're trying to do 3 things. I think you may have talked about it last week or the week before: the 3 legs on the stool. From the outside, you intuited that very well. I would do just a little refinement on that.

That's what I was going to ask you. Just tell me where I was right and wrong.

You were adjacent to everything. On one leg, we are trying to bring down this massive federal debt and cut the spending, but in a controlled way because you can't do it all at once.

I don't like to repeat private conversations with the president, but I'll repeat this one because I think it really illustrates where his head was at. The first time I went to see him at Mar-a-Lago, he saw me walk in the door and said, “Scott, how are we going to get this debt and these deficits down without causing a recession?”

Fantastic.

And that's exactly where we are now: How are we going to get the debt and deficits down without causing a recession? I said, “Sir, when you win, you didn't get us here. We're going to set a goal by 2028. We want to get back to the long-term average. We're going to deflate it slowly.” The long-term average is about a 3% to 3.5% deficit-to-GDP ratio.

As I keep saying, the US doesn't have a revenue problem. We have a spending problem because we're averaging right about 18% in revenue, and I'm talking about the federal government—the federal government only. We're at about 18%. The Biden administration blew spending out to 25%. Normally, it's about 21% to 21.5%. We have 2% inflation; real GDP is 1.8%, so we get nominal GDP of 3.8%, and it all works out.

I had one of the heads of one of the Singapore sovereign wealth funds here last week. Guess what Singapore spends in terms of spending to GDP? Eighteen percent. They have no deficit, but they spend 18%. Eighteen percent. He said, “We have a lot in common with the Trump administration. We like small government. We don't like illegal immigration, and we like personal safety,” which I thought was very interesting.

Sorry, let me just understand. Deflating government spending is key, but the big challenge has been that we have now accumulated nearly $30 trillion of debt. The interest on that debt has started to grow. We now have to pay $1.2 trillion in interest payments per year.

That starts to consume more of the spending budget that we have at the federal level, which means we can spend less on the rest of the federal government's programs. That means you have to cut a lot more than you otherwise would have, which is what makes it so difficult and so painful. Is it realistic that you can get Congress to act in the way that Congress needs to act to get to the level that we need to get to, given the high interest payments and the high debt level that we have?

Yeah, with this Republican Congress. And look, I'm not sure what a deficit hawk is, but I think I would qualify as one. A lot of the Republicans—I actually have to coax them. You can't do this all at once. I was with one of the congressional budget committees 2 weeks ago, and they really want to cut this fast. I said, “Do you realize every $300 billion we cut is about a percentage point of GDP?” So we're trying to land the plane.

The plan is what I'd really like to talk about today. I think there are 3 plans here. Plan 1 is that we're going to delever the government through spending. We're also going to shed excess labor from the government. On the other side, we're going to deregulate the financial system. The regulated financial system has really been what I call a regulatory corset for a long time, and as we deregulate it, the private sector can relever.

So it's government deleveraging, private-sector releveraging, and the folks who lost their government jobs will be picked up by the more productive private sector.

This is really important, and I think this is the most critical thing. I'm really glad we got the chance to talk today because I hear so much about the conversation on any 1 of these topics independent of the others, and there's a relationship between them that's critical to understand—how this administration is aiming to drive an economic recovery that is not inflationary, is sustainable, and will also allow people to have the American dream in a way that they can't have access to today.

Yeah. Part of fixing the affordability crisis is figuring out where we can get prices down. Eggs are easy, but the other side of getting prices down is getting real wages up. Getting real wages up for working people goes back to Main Street versus Wall Street.

The second plan is to reorder the international trading system, bring manufacturing jobs back to the US, and reinvigorate the middle class. That means using tariffs where they were needed to bring other countries into line and to create an economic incentive to onshore some industries and supply chains.

There are tariffs, and then I think there are 3 other things we can do that are the centerpiece of the administration. We can have low and predictable taxes, substantially slash regulations—regulations are the equivalent of a regulatory corset—and create predictability in regulations. Then there's cheap energy.

Sorry, what is the relationship between the tax cuts and getting to a 3% to 3.5% deficit as a percentage of GDP, especially because the continuing resolution unfortunately gave folks a get-out-of-jail-free card because we kept the $2 trillion cap for the next one?

Yes, but you have to have time. I've been in this building—I think this is my 7th week. President Trump has been back at the White House for 8 weeks, so you actually do need time.

A lot of people weren't happy about the continuing resolution, but shutting down the government wouldn't have been productive either politically or economically. Does the tax cut get made up with tariffs, or does the tax cut get made up with cutting government spending?

Tax cuts and deregulation will change the growth trajectory. If the trend line has been 1.8%, and you can move growth to 3% or above, then you really change the trajectory. If you can keep expenses flat—or do the unthinkable and cut expenses—then you can really change the trajectory.

This is important. Government revenue as a percentage of GDP can go lower if you have lower expenses and a faster-growing economy.

Yes.

In isolation, tax cuts might reduce revenue, but when done with reduced government spending, deregulation, and a reordered international trade model, you theoretically accelerate economic growth in this country and increase government revenue overall, even with a lower tax rate. That's the theory, right?

And I'll tell you, shame on me. I was in the investment business for 35 years. I talked very confidently about what CBO scoring says, and it turns out I didn't know anything about CBO scoring. When you're on this side of the wall, you realize how crazy it is.

It's crazy. It's quite a gameable system.

Yeah, it's very gameable. One of the most gameable parts of it is that, in normal CBO scoring, we're saying that we want to renew the tax cuts. We're actually just renewing the current tax regime, but somehow, after they expire, they go back to the old rate. Spending never changes. Spending never has to get renewed.

And when I think about a mental model for how systems work and how they break down, one of the things that has caused this spending bulge is the idea that you never have to rescore spending. It's nuts. The incentive model is that when you have a constituency you represent as an elected representative that's earning from that spending, they're telling you, “If you want to get reelected, make sure my earnings stay and get me more.”

Every year, you have a set of elected representatives whose primary objective in a democratic system is to go in and get more money for their constituents. How do we solve that fundamental problem? How do you think about that?

Well, you have to deal with a second question. Do you actually think that's true? Do you think most politicians are here just to get money for their constituents?

Good question. I mean, it's OPM—other people's money. Danny DeVito had that movie. But you would regard that as being a good politician: You brought home the bacon for your district.

Yeah, that's because the continuing resolution—a lot of people didn't like it. But one of the things that a lot of people didn't like was that there were no earmarks in it. Like, how dare they?

Totally. The Christmas tree bill that shows up at the 11th hour, where everyone gets a little bit. Can you talk about deregulation as 1 very important lever? How do we add 50 to 100 basis points of growth back in? We're going to do it through deregulation. How do you undo the financial corset, as you said? What are the 3 or 4 big ideas that you'd like to effect?

Yep. We're reexamining all the bank regulations. Why are they there? Why do banks have to—I can't remember—hold 5% or 7% in Treasury bills? What are the regulations, and why are they there? I had a whole group of community bankers, or small banks, here last week. Why do they have to hold the same amount of capital that JPMorgan, Wells Fargo, and Citi hold when they don't have the complexity?

One of these small bankers said, “Well, Bank of America does it this way.” Bank of America has a trillion dollars in deposits. This one had $183 million.

When you look at the regulatory overhang of some of these things—Basel I, Basel II—you have all of these frameworks and, as a result, all these organizations running around trying to help you administer this complexity. All it does is lower economic activity in the end.

I know you all talk about incentives a lot. Back to incentives: What's a regulator's incentive just to keep tightening the corset? They don't care about growth. They don't care about common sense.

Turn off every risk. It’s their job.

If you had to create a metric to say, “Okay, here’s how we’re going to measure this undoing of the financial corset,” is it lending velocity by private lenders, so that private releveraging can occur? Is that a good way to think about it, or are rates a way to think about it?

It doesn’t have to be rates, but if we do all the things I was just talking about—if we deregulate, if we have cheap energy, if we shed excess labor from the government, if we get government spending down—then inflation should come down, and rates should come down.

On the question of how we’re going to measure it, I don’t have any problem with private credit. I actually think the dynamic is exciting.

It’s dynamic. It meets the business where it is. I agree. The strength of the U.S. financial system is its depth and now its breadth. But you can see what’s happened: so much lending is being pushed outside the regulated banking system. That tells you it’s overregulated.

One test will be how bank lending—especially from small regional banks, small banks, and community banks—has come undone. These small and community banks are 70% of all agricultural loans and 40% of small-business loans, and that’s one of the reasons Main Street has been stifled.

Can you talk about how you will work with the Fed in changing all of this financial system? Do you need to work with Congress, too, to make these changes? Also, generally, what are your thoughts on the Fed in this process—helper or foe? Where do they stand?

I 100% support the Fed’s autonomy in monetary policy. I don’t agree with it all the time, but that’s how it is. I’ve said I won’t comment on prospective policy. I can talk about their mistakes in the past, which have been numerous.

I think, like with any system, as it expands beyond the core, some of the things they’ve done in regulation, some of the things they’ve done around climate and DEI, and maybe even nonstandard monetary policy threaten their independence. I want them to stay strong, robust, and independent on monetary policy. On regulation, I think they have been much too harsh, especially on smaller and medium-sized banks.

There are 3 main federal bank regulators: the Fed, the Office of the Comptroller of the Currency, or OCC, and the FDIC. There are other regulators—the SEC and the CFTC—but the federal banking regulators are those 3.

Here at Treasury, we have something called FSOC, the Financial Stability Oversight Council, and I chair that. Via that, the President’s Working Group is another convening mechanism that I plan to use to keep pushing for safe, sound, and smart deregulation. Why are we doing this? Why are we doing that?

Again, there’s a capital charge to banks for buying Treasury bills.

Totally. I think there’s a chance that if we take that away—it’s called the supplementary leverage ratio—it becomes a binding constraint on banks. We might actually pull Treasury bill yields down by 30 to 70 basis points. Every basis point is $1 billion a year.

Can we talk about that for a second? I think I’ve said this for a year, probably, but one of the biggest mistakes that I think Janet Yellen made was the continued issuance of money on the short end of the curve to finance these deficits, which leaves you with an incredibly difficult challenge. I think over the next 9 months there’s like $9 trillion or $10 trillion that has to get refinanced. Do you want to talk about that?

I thought that when rates were low, you were supposed to term out rates. Instead, the Treasury for the past few years has pulled rates in. I think part of that was to keep rates lower. When rates moved back up toward 5%, I maintained that policy, but I’m maintaining it because, going back to David’s question, when are we going to see the results from getting government spending under control? I don’t think the markets recognize it yet.

They’re not sure what to believe. We hear this commentary a lot: “What do you really mean?” There’s just a lot of uncertainty. There’s a big spectrum of opinions there.

The central value tendency—what’s the center of it? The range of outcomes is so broad.

We know there’s a problem there. We know there’s waste, fraud, and abuse. Quantify it. As we are more able to quantify it, we will get credit for it.

Let me go back to the question I asked earlier. How much does this administration need Congress to act to get to a 3% to 3.5% deficit-to-GDP ratio? What’s your read on Congress, and how willing and able are they to take the action that’s needed here?

I think there are a lot of headlines, especially after the CR, about the Democrats being in disarray. The media likes to write about disarray. I think the underreported story here is that Republicans have, for a change, actually been very disciplined. A lot of that is President Trump shepherding the party and the movement.

Imagine: he said, “Mike Johnson will never get reconciliation instructions out of the House. He’s got such a slim majority.” Well, he did it. He said Mike Johnson would never be able to pass a clean CR. He did it. Let’s see what happens with the budget.

We need Congress to be our partners on the budget. They’re very engaged—the House and the Senate. Everybody recognizes that if we don’t get this done, it’s going to be pass or fail. It’s the biggest tax hike in history.

Where does DOGE come in?

DOGE is the cost-cutting effort, and it’s the first time we’ve really ever had business people looking at it. The Clinton-Gore Commission that we hear a lot about—I think it was a bunch of business-school professors. Here, you’ve got real CEOs. You’ve got Lutnick, you’ve got Burgum, you’ve got Elon. This cabinet is stocked full of experienced operators who can go in and identify opportunities to save the taxpayers money while still getting the results.

We had this crypto council meeting the other day, and I was sitting there looking at it. It was myself, Secretary Lutnick, and Kelly Loeffler. Everybody was a market person. Forget business—we were all market people.

I’m completely aligned with what Elon’s doing. Everyone says, “Do you have to do it so fast?” You have to do it. I’ve only been in this business for 7 weeks. I’ve only been in Washington, D.C., for 8 weeks. But the thing I can tell you is that if you don’t move fast, the vested interests will weigh you down. The quicksand will come up, or the claws will get you.

Everybody’s got lobbyists. Think about it: within a 10-mile radius of here, 25% of the GDP of the U.S. pulsates through here every day. Everybody wants to skim a little.

I said to Elon in a meeting, “People are mad at you because you’re moving their cheese.” He said, “It’s not their cheese. It’s the American people’s cheese.”

100%. Every dollar spent goes into someone’s pocket, and that person is going to fight tooth and nail to keep that dollar flowing into their pocket. It’s a very difficult role. There is no winning in Elon’s role. Every single time he takes action, there are people who are going to come after him and the administration.

There’s no situation where the actions aren’t recast or reclassified in the media as something different. There’s nothing but downside as you make these changes to the individual organizations that participate. It takes a while for the flow of that money, or those individuals, to find its way back into the productive private economy.

That’s where I think there’s a big gap and a big challenge in the perception of the changes that are going on right now. Everyone sees the cuts, but they don’t see the benefits. Those are 9, 12, or 15 months down the road, and that’s a really hard thing for most people to reconcile.

I’d say there are a couple of things. Everyone’s hearing “cuts,” and they think they’re government services. They’re not. I keep saying it’s the Department of Government Efficiency, not government extinction and not government elimination. Can we make it run much better with fewer people and fewer costs?

I don’t want to demonize any of these federal employees, because I’ll tell you, in this building I’ve been so impressed with the quality of the people. I would have hired them in my private firm. They are great public servants.

I need you to stay for the weekend, and I need a 25-page memo in 72 hours. That’s a super-high-quality employee.

I actually think that when all this is done, there will have been 2 big savings. One will have been on these contractors. We were just talking about this with Elon. He gave us an incredible statistic. He said, “I’m not going to name the firm,” because he didn’t want to, “but this one organization gets 98% of its revenue from the government”—it was in the newspaper, so we can say it—“Booz Allen.” We were talking about this, and then we were going through the numbers on the other firms and the whole thing.

What kind of risk management is that, by the way?

Yeah, but it tells you that they didn't manage the risk.

That's right. It tells you how entrenched they believed they were and how good it is for them. And how good it is.

You're absolutely right. The way the grift works, you can only have 6-month contracts, but there are people who have had 40 six-month contracts. Incredible. They've been in situ for 20 years.

Incredible.

I'm so happy there is transparency and visibility into this. If for nothing else, the administration providing this level of insight and data is so important for taxpayers and individuals in this country to see, to recognize, and importantly, to understand just how much of this grift is going on. It's frightening, and I'm glad that it's being addressed and that the American people can see it if they want to.

So this is what I was going to ask you. Let's just say that somehow DOGE slows this whole thing down. You know what people say is the conventional wisdom: Well, then the only place to look will be things like entitlements. Do you think that's true?

Well, I think that now that the cat's out of the bag, the American people are not going to stay with this. Maybe in the Northeast Corridor there's some pushback, but when I've seen the polling data, the rest of the country does not want this to stop, and this administration's not going to stop. The courts are trying to throw sand in the gears, with some judge saying, “Oh, all these workers have to come back in.” But I also think we've moved really quickly now.

One very large department that everybody deals with on April 15th has its help desk fully staffed 24/7, 365 days a year. They have the same number of people on Christmas Eve as they have on April 14th.

Wow. This is, by the way, something that I've seen being a lightning rod. Theoretically, every dollar you spend on the IRS, you get $3 back, or whatever it is.

That's not necessarily true. I just want to be clear that you can still get all your tax revenue at the federal level, but you don't need to waste it. I'd be the ultimate chump if I said, “Oh, we're going to cut spending,” but I also cut revenues with the IRS, which Treasury controls. My 3 goals are very simple: revenue enhancement, privacy, and customer service.

Totally. There's a body of knowledge that says, if we just fed the entire federal tax code into these AI models—and 4 or 5 of these companies can do this—what you can give Americans is a guaranteed, resolute ability to file taxes with the assurance that there is no waste, fraud, and abuse. All of a sudden, you take this incredible weight off people's shoulders.

Sometimes it is said that you get audited for political reasons. We had a big announcement on Tuesday, and we brought in the 200 Biden whistleblowers, who have a lot to say about who gets audited and who doesn't. They're going to be sitting in this building, working on IRS matters and understanding exactly how these audits get triggered, how these political witch hunts happen, and trying to change the ethos of the building.

Again, 99% of the people at the IRS are good people. It's just like all these other agencies where there are bad folks. But to your point, this is where technology can create very reliable guardrails for the American citizen. It's like, okay, if this model says I owe $1,000 in tax, this is it. I'm not trying to change anything. I've fed it all the tax code first, and you just know.

Let me go back to entitlements. I talked last week on our podcast about Social Security. Social Security has a $2.7 trillion balance, which is basically a Treasury bond that's owed that they can't trade out of. Should Social Security have invested in the S&P or invested in equities? Why don't we turn Social Security into a sovereign wealth fund and invest it for the benefit of all Americans going forward?

Yeah, I think there's the optimal, then there's the possible. George W. Bush tried to privatize Social Security, and I saw your numbers, listened to your numbers going way back: 1971, and with $15 trillion or $16 trillion that we'd have. I don't know what the numbers are since W. tried it.

We wouldn't be thinking about a problem in a few years. But I think now you have to play the hand you're dealt. I think we are dealt the Social Security hand. Maybe we could reengineer it if we could create the sovereign wealth fund and have that on the other side.

There are a lot of philanthropists who are looking at baby bonds. If you can create some kind of investment account for newborns, then that would run on a parallel track to Social Security. So that would be compounding.

The other thing would be a safety net. But it's still sitting in Treasuries on the other side, and that's where there's an opportunity—not just to drive up returns, but to participate in the American economy and give all Americans today the ability to know that they have some participation in the American economy, rather than having their retirement funds sit as a loan to the federal government for spending, which I think could be a big dramatic change. I don't know if they need to be independent, but I think it's a real opportunity for us. Are you excited by the idea of the sovereign wealth fund?

I am, and I'm excited by the idea. This is President Trump. Everything he does isn't in a straight line, but I guarantee he has a destination in mind. The idea is that he's going to be the first president in generations who wants to create assets for the American people, not just debt.

Yeah, yeah. So he wants to take the debt down. And then this idea of assets—there was a lot of talk about this economic deal we're going to do with Ukraine. That would have gone in the sovereign wealth fund, right? The government has a big stake in Fannie Mae and Freddie Mac. When it comes out of conservatorship, where does that go?

As you mentioned, Doug Burgum did great work when he was governor of North Dakota. North Dakota has the equivalent of 2 state sovereign wealth funds, and for—I don't know—700,000 or 800,000 people, I think they had $25 billion, right? And the Alaska Permanent Fund. But all that's from natural-resource money going in.

The other day, when the sovereign wealth fund was announced, President Trump surprised me in the Oval Office and said, “Could you make a few remarks?” I said, “Well, we're going to mobilize the asset side of the balance sheet.” All the gold bugs said he's going to revalue the gold. I can say today we're not revaluing the gold, but what we are going to do is have Doug Burgum at Interior and every other department head look for the assets that we can mobilize.

So if we have energy leases that the federal government owns, or going back to the housing shortage, the federal government owns a lot of land in downtown urban areas or in suburban-adjacent areas in Nevada and Utah, can we use that land?

Do you see a wave of privatizations as a way to both pay down the deficits and debt? That's important to me. Why put it in a sovereign wealth fund versus paying down the debt? Help kind of do the finance math for us on that. You think you get a higher return, right?

Well, anything that beats our current return—our current interest rate.

Yeah. Not that I'm keeping score, not that I watch it closely, but the 10-year Treasury today is 4.28.

4.28. Yeah, so it's responding well. Can we do better than 4? Can we do better than 4.28? I think with this group and this Cabinet, and if we can put in—right now we're working on the study group for the sovereign wealth fund, and we want to do best practices. We're talking to people around the world, investment people, and a lot of the other big sovereign funds. We're going to do best practices, and we want this to be a legacy event.

Dan Loeb made this comment that the Australian superannuation system has 30 managers, and it has as much on its balance sheet today in its fund as Social Security does—about $3 trillion—and they have 7% of our population.

Yeah. No, it's incredible. It's incredible. It's incredible. I was with one of the Middle Eastern funds, and I said something about oil revenue. They said, “We haven't had an injection into the fund in 20 years.”

Why was this such a miss for America? What happened in the United States? We took every excess dollar we had and invested it in the future. We built infrastructure. What happened that kept us out of this model, where others were so successful and clearly have now gotten ahead of us, and their people have a greater kind of safety net than we do?

I think it was just this idea that it was supposed to be a safety net, not some kind of prosperity ramp. The Old-Age, Survivors, and Disability Insurance fund—that's what it's called, right? Under Social Security.

You've mentioned cheap energy as a critical part of this holistic program, I think, 3 times now. Where did we make mistakes on that path where energy gets out of control? What do we need to do to make sure that energy—the incremental cost of the electron, basically—goes to 0?

Well, I think the biggest challenge we're having right now is trying to get the private sector to lock in for some things that might not have a payoff for 5 or 10 years, and how do we avoid student body left, student body right, with administrations coming and going.

Well, this is an incredibly nuanced and, I think, important point because we have this very vibrant, as you know, tax equity and transferability market that allows a lot of these organizations to make these 5- and 10-year investment cases. For all the issues with the IRA, of which there are many, I think the one narrow aspect of it was that it calmed the markets about the future of those specific ITC credits and transferability.

FERC said 90-plus percent of our incremental electrons, as of December, were from sources that were leveraging these ITC credits and that transferability. So, to your point, we have this very delicate balancing act. Scott Bessent

But there’s the tax side, and then there’s the regulatory side. With fossil, it’s tougher because it crosses a lot of state lines. There’s a lot more permitting, right? There’s a lot less permitting for solar farms, wind, and geothermal.

Yeah, yeah. Nuclear is going to be a big part of it, but it’s not going to happen tomorrow. We’ve got to fix the supply chain and the regulatory side.

Well, we’ve got to fix the supply chain. We’ve got to fix the regulatory side. We’ve got to decide which model we’re going to go with. I’m told that you two probably know more about nuclear than I do, but he loves it. I hate it.

Okay. Well, no, I don’t hate it. I like nuclear. I just think it’s 10 years away.

He’s a loser. Don’t listen to him.

Yeah, he doesn’t really— It’s just not an investable thing for the next—

But it’s important because the question is, when it becomes one, that’s when we know we’ve fixed the problem.

But to the point that it’s not investable, that’s where the government needs to step.

Absolutely. I 100% agree with you. That’s where we have to bridge to the technology. We have to do the time arbitrage. I’m also told, especially with the smaller plants, that you need to cluster them, and you’ve got to find somebody who wants to cluster them and all that.

Let me ask you one more question as we get to the end. What’s been the most surprising thing for you in this role since you’ve been in office?

The national security aspect. I would say 40% to 50% of my day. Treasury does a lot of national security work, whether it’s CFIUS, in terms of foreigners who want to buy U.S. assets; whether it’s sanctions; whether it’s OFAC; or anti-money laundering.

We’ve just designated the Mexican cartels as foreign terrorist organizations. President Trump, over the weekend, launched a very aggressive missile strike on Houthi assets. Underneath that, we had already been working for several weeks on their bank accounts.

I see.

Anyone who is adjacent to them—the Iranians supply the Houthis with their ecosystem. Before I got here, Treasury had disrupted the ecosystem so much that the Iranians used to hand them cash. Now they’re just handing them, “Take this oil tanker and try to sell it,” right? There is the ability to break that down.

When you go home and you’re talking to your kids, you’re talking to your husband, and you’re saying, “This was so cool,” there must be moments where you’re like, “This was so cool. Do you have any anecdotes that you’re comfortable sharing where you’re just like, ‘I can’t believe I’m doing this job’?”

Well, there have been several. A good example is that my family was actually there because, after the inauguration, I asked President Trump, “May I bring my family in, say hello, and get a photo?” We were sitting in the Oval Office. It was myself, my 11-year-old daughter, my spouse, and my 15-year-old son, and President Trump was having a great conversation with them.

Then he said, “Oh, Scott, while you’re here, let me call in these other 2 people and we need to discuss this.” So they actually got to see government being done live. There’s that.

I have to say, I think the moment with President Trump, Vice President Vance, and President Zelenskyy was kind of a once-in-a-lifetime thing in the Oval Office. I hope it’s once in a lifetime. I was sitting there in the front row of history—the vice president, Secretary Rubio, and I on the sofa—and watching President Zelenskyy do what I thought was the biggest diplomatic own goal in history.

Yeah. I think you said it very well on TV afterward. It really was. Based on what you said, because you were there and you tried to negotiate with him in Kyiv, it was a very escalated—I think you used the word “escalated”—or high-decibel conversation.

High-decibel. Yes.

So, my job for 35 years was to be outside the room, try to put my ear to the door, maybe lift myself over the transom, figure out what the leaders needed to do and were going to do, and then how it would affect the markets.

Now, it’s fantastic and amazing and stimulating, and a little scary, being the person in the room who has to ask, “What should we do? What can we do? How’s it going to affect the markets? How’s it going to affect the real economy? What’s it going to do to working people in America?”

So, how do we fix affordability?

We’re just going to have to go through and ask, where’s the problem? What’s the solution? Are the insurance markets broken? What can we do there?

I’ve been involved in the housebuilding business. There’s been no technological change in housebuilding in 50 years, maybe 60. Some of the building codes go all the way back to the Chicago fire, right? So what can we do? The way we categorize housing is stick-built or modular. Is there something in the middle—prefab?

The more that comes out of a factory, the more standardized it is. From D.C. to Bethesda to Potomac, you could be in contiguous neighborhoods, and if they’re different municipalities, they’d all have different building codes—not zoning, building codes.

So what can we do? Is there some kind of window guidance that the federal government can give in terms of the more that comes out of the factory, the cheaper it’ll be, the faster we can make it, and things like that? Is there pressure or influence that you could apply?

One of the things you mentioned earlier was, take San Francisco. There’s an artificial constraint created by the zoning paradigm, and it’s not clear how you unlock that. Maybe it’s up to private citizens to have regime change at the local level. But how do we unclog that part of it to marry up with this kind of thing? It would be great if you could just build up in many places.

Yeah. I think there are a lot of things where you can look around and find something interesting that’s being done somewhere. I lived in Greenwich, Connecticut, for a while—maybe the richest suburb in America. There’s a ton of multifamily there: very expensive, very nice multifamily. There’s some affordable housing, but Greenwich is not all 10 acres and a horse farm.

The state of Connecticut has put in—I guess it’s a law—that every municipality has to allocate 10% of vacant land to multifamily. If the zoning board won’t give you a hearing, you, as a developer or as a nonprofit for housing, can go over the top and go to Hartford, and then Hartford will give you the authority.

Well, no town wants the state doing it on their behalf, so now the towns negotiate.

Yeah.

I think there are a lot of things that can be done. Again, on insurance, I’ve been thinking about whether there’s something the federal government could do for California where everyone’s paying homeowners insurance, then there’s reinsurance on top of that. Then I think the California reinsurance plan is called FAIR Plan.

Yeah, it’s a separate plan.

Yeah, yeah, but you’re stacking it. So is there something we could do where you put another layer of private money in there and then the federal government is the fifth-risk tranche, right? But if the federal government comes in, can we mandate proper hardening changes in the building code? Changes in brush cutting and material choices?

Right. Right. Yeah, makes sense.

Great. I think there’s a lot to do.

And obviously, energy—I mean, just getting back to affordability, right? Energy costs come down.

I took the words out of your mouth.

No, no, no, no. But energy costs are energy costs, and then there’s also, for food, the transportation cost of getting it to the grocery store, and everything that’s made out of petroleum products. I think we can do that.

Yeah, I think there’s a lot to do.

And it shouldn’t be too hard. We should probably be announcing it in about 10 days. We’re going to have an affordability czar, but it’s going to be someone with a lot of experience in supply chains, figuring out what a lot of the quick fixes are that we can do.

Back to the question: what really has people anxious? Inflation, for now, is actually pretty quiet, but affordability has gotten so far away from everyone. How can we bring that down?

For all our friends at home who talk a lot about climate change and carbon-free energy, one of the things that I always point out to people is that the cheapest way of driving energy production in this country is that there’s a low-carbon or carbon-free alternative out there that’s actually cheaper than standing up new plants.

And there’s an acceleration. I don’t know how much this administration thinks about that relationship, but it seems to me like if we can unlock energy production, costs come down and this economy transitions.

Well, it transitions, and I think it’s also about not being dogmatic. I saw what the Biden administration did with EVs. I have an EV. I can’t wait for it to come off lease, but I also have a hybrid, and I think I fill it up maybe 3 times a year.

Totally. But this administration had a jihad on hybrids because they didn’t pass the purity test. So they were picking winners and losers in a way that left a lot of us scratching our heads.

Yeah. Yep. And cheap energy solves a lot of problems.

I think cheap energy is energy security too, 100%.

Because that’s why Europe’s kind of over a barrel, literally. And it’s why the Russian war machine hasn’t, again literally, run out of gas. To the extent that we believe we’re in an existential arms race for technical supremacy, it’s really on 1 dimension, which is AI. And AI is so needy of energy.

So if we don’t pull all of these issues together and realize that we need to basically take the incremental cost to zero, whatever we do, we need to create the incentives and package it all together.

I mean, we can’t compete in manufacturing without energy. We certainly can’t compete without energy.

Yep. Yeah. I mean, we’re not going to crush labor like China and some other countries have done, so we’ve got to crush the energy price.

Right. Exactly. Right. And when you’re in the Oval, what are the truths and misconceptions of the president? Meaning, on the outside, what do people know or not know?

Oh, how about this? We had a lot of foreign leaders come in, and I knew someone in one of their entourages. I won’t tell you which one, but afterward he came up to me and said, “Holy crap. He’s really smart. President Trump has perfect recollection,” because he was talking about something that had happened in that country 30 years ago. So the president listens. He is judicious. He is just taking it all in. He likes to see how people react. It’s just incredible executive skill.

The other thing, too, is that he’s tough. But I went in and showed him—we were talking about something the other day, and I said, “Well, you know, this is going to cause some layoffs.” He said, “Well, let’s try to fix it.”

Yeah. Yeah, let’s try to fix it. So I always say he really regards himself as the mayor of America, right? 330 million people. He wants to be personable to everyone, and he cares deeply about all of them. He doesn’t care whether you’re Elon Musk or the guy cutting the Rose Garden—you’re his constituent.

Great. Well, Scott, thank you so much for taking the time. This has been wonderful—a pleasure—and we really appreciate the insight.

Yeah. And thanks for the service, and thanks for doing the role.

Good. Thanks. Appreciate it. Thanks.