All-In Podcast: Scott Bessent – Fixing the Fed, Tariffs for National Security, Solving Affordability in 2026

Date: December 22, 2025
Participants: Chamath Palihapitiya, Jason Calacanis, David Sacks, David Friedberg, Scott Bessent (U.S. Treasury Secretary)

Episode Overview

This episode welcomes back Scott Bessent, U.S. Treasury Secretary, for a comprehensive year-in-review and forward-looking discussion on the fiscal state of the U.S. government, the impacts of tariff policy, progress toward budget deficit reduction, the Federal Reserve’s evolving role, and steps taken to enhance American affordability and Main Street prosperity. The conversation is candid, policy-dense, and marked by Bessent’s direct, often humorous style as he reflects on both the administration's victories and challenges.

Key Discussion Points and Insights

1. Fiscal Health and the Budget Deficit

• 2025: "Setting the Table" for future growth (“‘The feast and the banquet is going to be in 2026.’” – Scott Bessent, 01:38)
• Deficit Contraction: Fiscal contraction has begun; down to $1.78T from $1.8T (02:15).
  • Deficit as % of GDP: Peaked at 6.8%; forecasted to drop to mid-5s.
  • Goal: By Trump’s departure, deficit/GDP with "a three in front of it"—stabilization and initial paydown.
• Criticism of Prior Policy: Biden’s late-term spending spree; 40% spent in Q4 2024 for political reasons.

2. Tariffs: National Security, Economic Impact, and Misconceptions

• Tariffs as National Security Tool (07:20):
  • Used to negotiate trade deals and combat fentanyl imports.
  • Led to cooperation from Mexico, Canada, and China; observed drop in fentanyl deaths.
  • Tariffs threatened in response to China’s rare earth export restrictions brought Beijing to the negotiating table.
• Misunderstandings by Critics (03:38):
  • Public and experts dismissed tariffs as simply "Trump’s idea," ignoring evidence.
  • Failure of imagination: “If President Trump cured cancer but it caused dandruff, people would blame him for a ‘dandruff epidemic.’” (04:13)
  • Tariffs do not cause inflation; recent Fed study demonstrates they can be disinflationary (05:46).
• Revenue and Deficit:
  • Tariff revenues seen as "payback" for historical trade imbalances but over time intended to decrease as domestic manufacturing and tax receipts rise (09:38).
  • Balancing tariff income versus domestic tax reductions discussed as a long-term shift (07:17).
• Legal Uncertainty:
  • Awaiting Supreme Court decision on the legality of executive tariffs authority (11:12; 14:02).
  • Bessent opines that losing tariff powers would harm national security more than revenue.

3. Main Street vs. Wall Street: The Approval Paradox

• Public Discontent vs. Market Boom (15:20):
  • Despite Wall Street’s surge, Main Street approval ratings for Trump administration are historically low, especially on inflation (-30% net) and economy (-18% net).
• Why?:
  • Bessent: Administration inherited a mess, high price levels linger from the prior inflation spike (16:18).
  • Common Man Index: Essential goods (gas, insurance, rents, staples) up an estimated 35% over four years.
  • Immigration noted as a driver of rent inflation; recent drops attributed to policy changes (18:20).
  • Real wages rising, inflation declining, but time required for public to feel improvement (19:23).

4. Data Integrity and Economic Statistics

• Concerns about BLS Data:
  • October job numbers filled with ‘zeros’ and methodology questioned by critics.
  • Bessent: Measurement always has issues, but October’s numbers are robust; trendlines confirm improvements (20:10–22:09).
  • Notably, rent and energy prices (major CPI components) now declining despite being recorded higher in the dataset.

5. The Federal Reserve: Historical Context, Critique, and Future Direction

• Origins and Evolution:
  • Fed created (1913) after the Knickerbocker crisis of 1907 (24:05).
  • Treasury lost seat at the table post-WWII.
  • Post-GFC: Regulatory overreaction and QE led to years of poor growth and exacerbated inequality.
• Fed as 'Engine of Inequality':
  • Bessent sharply critical of extended QE (“The Fed became the engine of inequality.” – 27:15).
  • Asset holders benefited disproportionately; gap widened during/after Covid stimulus.
• Balance Sheet, Rate Setting, and Regulatory Complexity:
  • Fed now a “three headed beast” (29:10).
  • Operates like a hedge fund, subsidizing operations from risk-taking (29:45).

Notable Quote:

"…Not everyone could buy equities. So we ended up with this two tier economy."
— Scott Bessent, (27:52)

• Depoliticizing the Fed:
  • Calls for smaller Fed footprint, fewer overlapping functions, and returning to predictability (41:11).
  • Next Fed Chair selection will determine return toward traditional role: Kevin Warsh, Kevin Hassett, Christopher Waller, Rick Rieder under consideration (39:57).

6. Interest Rates, Bond Markets, and Global Appetite

• Interest Rate Dynamics:
  • 10-year Treasury rates reflect both fiscal condition and global demand; stabilizing deficit will help bring rates down (31:14, 32:10).
  • Comparison to Bundesbank’s fiscal-monetary coordination.
• Uncertainty Over Inflation Targets:
  • 2% target criticized as arbitrary; argues for flexibility but only after credibility restored (38:30).
• US Bonds Remain Attractive:
  • Despite worries about foreign buyers (China selling), US bonds outperformed globally in 2025 (37:42).

7. 2026 and Beyond: Main Street, Credit, and "State Capitalism"

• What’s Promised for 2026:
  • Regulatory relief for small/community banks, reversing the post-GFC trend of consolidation and disappearance (43:58).
  • "Too small to succeed" banks will be empowered, boosting small business, ag, and real estate lending.
  • No repeat of deficit-fueled inflation (45:00).
  • Focus on working wage acceleration and leveling the playing field.
• Strategic Investments & “State Capitalism”:
  • Select “state capitalism” justified on national security grounds: “We are in an economic war…we have to be prepared if it could [become kinetic].” (47:50)
  • Key industries (pharma, chips, steel, shipbuilding) now receive direct government support to ensure supply chain resilience.

8. 2025-2026 Tax Cuts and "Trump Accounts" for Financial Literacy

• Tax Cuts Arriving January 1st:
  • Immediate expensing for equipment & factories, aiding capex and expected to drive an employment boom (50:38).
  • For individuals:
    • No tax on tips, overtime, Social Security.
    • Auto loan interest deductible on American-made cars.
    • Retroactive effective dates expected to result in large household refunds in Q1 of 2026 (51:45).
• Trump Accounts (“Biggest merger in history: Wall Street and Main Street” – 55:08):
  • Every child born receives $1,000 in an investment account.
  • Goal: universal equity ownership, improved financial literacy, accessibility for all income levels.
  • Philanthropic and corporate partnerships further boost funds.
  • “Every man and woman a market participant.” (55:22)

Notable Quotes and Memorable Moments

• On Tariff Criticism:
  “If President Trump cured cancer but it caused dandruff, people would say, ‘President Trump has caused a dandruff epidemic.’”
  — Scott Bessent (04:13)
• On Inflation and Public Anger:
  “They said, ‘Eat your grit, drink your grog, have your bread, peasants.’ ... We understand that the American people are hurting.”
  — Scott Bessent (16:55)
• On the Fed’s Modern Role:
  “The Fed became the engine of inequality.”
  — Bessent, discussing the consequences of prolonged QE (27:15)
• On Education and Equity Ownership:
  “This is the biggest merger in history because it is merging Main Street and Wall Street.”
  — Scott Bessent, regarding Trump Accounts (55:08)
• On National Security and Supply Chain:
  “We are in an economic war and we do not want it to become a kinetic war, but we have to be prepared if it could.”
  — (47:50)

Timestamps for Key Segments

• Deficit Reduction Progress: 00:55–03:13
• Tariffs and National Security: 07:17–09:38
• Supreme Court Tariff Authority Case: 11:12–15:20
• Main Street vs. Wall Street Approval Ratings: 15:20–16:18
• Affordability & Inflation Data: 16:18–22:09
• History and Critique of the Fed: 23:53–30:28
• Interest Rates and Fiscal-Monetary Dynamics: 31:14–33:00
• Next Fed Chair Candidates: 39:57–41:11
• Outlook for Main Street in 2026: 42:44–45:42
• Strategic Industries & State Capitalism: 46:42–49:56
• Tax Cuts and Trump Accounts: 50:38–56:21

Conclusion

Scott Bessent’s conversation with the All-In hosts provides a revealing look at the current U.S. economic doctrine—emphasizing pragmatic protectionism, bold fiscal adjustment, and direct intervention in markets for both security and public benefit. The narrative is clear: 2025 was groundwork, 2026 will deliver results—especially for Main Street. With bold ideas like universal investment "Trump Accounts," plus targeted tax relief and an assertive industrial strategy, the administration is betting on a broad-based economic resurgence and lasting changes to American economic participation.