Secretary of the Treasury & Michael Knowles: Scott Bessent White House Interview

Summary

The Michael Knowles Show: Interview with Treasury Secretary Scott Bessent

Episode: Secretary of the Treasury & Michael Knowles: Scott Bessent White House Interview
Release Date: March 30, 2025

In a compelling episode of The Michael Knowles Show, host Michael Knowles engages in a substantive discussion with Treasury Secretary Scott Bessent. The conversation delves into pivotal economic policies, focusing on interest rates, tax cuts, fiscal strategies, and the administration's approach to reshoring American manufacturing. This summary encapsulates the key points, discussions, insights, and conclusions drawn during their exchange.

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1. Reduction of Long-Term Interest Rates and Mortgage Rates

Michael Knowles opens the dialogue by highlighting the administration's success in reducing long-term interest rates and mortgage rates since the inauguration. He notes, "You have made a priority, the reduction of long term interest rates and of mortgage rates. And since the inauguration, both of those have come down materially" (00:25).

Scott Bessent emphasizes the significance of these reductions in addressing the affordability crisis, particularly in the housing sector. He attributes the initial spike in rates to the Biden administration's policies and the Federal Reserve's aggressive rate hikes aimed at curbing inflation. Bessent stated, "The Biden administration created an affordability crisis... mortgage rates" have been a central issue (00:44). He underscores the administration's efforts to lower rates through permanent tax cuts, deregulation, and energy price reductions, linking these measures to a hopeful decline in inflation.

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2. Extending and Expanding Trump's Tax Cuts

Transitioning to fiscal policy, Knowles inquires about the administration's efforts to extend and expand President Trump's tax cuts amidst concerns from fiscal hawks about the burgeoning budget deficit.

Bessent categorically frames the extension and expansion of the tax cuts as a "pass fail" scenario, warning that failure to enact them could result in "the biggest tax hike in the history of the United States," projecting a staggering $4.5 trillion deficit (02:16). Highlighting the bipartisan collaboration within the "big six" leadership team, he expresses optimism about the legislation's passage, stating, "It looks like this could get done sometime in the early summer" (03:48).

Addressing fiscal concerns, Bessent outlines a balanced approach that includes growth-oriented components like full expensing and incentives to reshore manufacturing, alongside strategic spending cuts. He emphasizes the administration's commitment to deficit reduction without stifling economic growth: "Every 300 billion that we cut is 1% of GDP we didn't get here in a year" (04:02).

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3. Fiscal Strategies and Deficit Reduction

The conversation delves deeper into the specifics of the proposed tax legislation. Bessent details several key provisions aimed at stimulating economic growth and addressing affordability:

• No Tax on Tips and Social Security: Eliminating taxes in these areas to increase disposable income for workers.
• Tax Deductions for Auto Loans: Making auto loans deductible for vehicles manufactured in the United States, thereby promoting domestic production.
• Spending Cuts on the Green New Deal: Criticizing the Green New Deal for its fiscal implications, Bessent mentions, "The CBO scored it at about 250 billion over 10 years. It's up 2 1/2 x" (05:15), advocating for prudent spending to manage the deficit.

He balances these measures with a realistic approach to deficit control, projecting a gradual reduction over the next four years with the goal of balancing the budget within a decade.

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4. Reshoring American Manufacturing and Trade Policies

Addressing the administration's strategy on reshoring American manufacturing, Knowles raises concerns about the interplay between tariffs, trade barriers, and their impact on jobs and revenue. He poses a critical question: "They do seem to be a little bit in conflict with each other" (05:15).

Bessent deflects the ranking of priorities to President Trump, aligning the current administration's policies with those of Alexander Hamilton, the original advocate for tariffs. He explains, "President Trump has added a third leg for negotiations... as a way to prevent people from trading with Venezuela" (06:18). Bessent elaborates on the multifaceted approach to trade, addressing not just tariffs but also non-tariff barriers such as safety standards, labor costs, subsidies, and currency manipulation.

He anticipates further clarity on tariffs post-April 2nd and remains optimistic about syncing fiscal legislation with trade policies to invigorate the economy. Bessent concludes, "early summer we're going to get this tax bill done" (07:51).

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5. Conclusion and Forward Look

In wrapping up the interview, Knowles acknowledges the dynamic and sometimes unpredictable nature of the Trump administration's policies, remarking, "Unpredictability is wait and see when we get the announcement on April 2nd" (07:51). Bessent reinforces the administration's strategic plans to navigate economic challenges through comprehensive tax reforms, strategic spending cuts, and robust trade policies aimed at revitalizing American industry.

The episode underscores the administration's commitment to fostering economic growth, enhancing affordability, and maintaining fiscal responsibility. Through collaborative leadership and targeted policies, Treasury Secretary Bessent and his team are portrayed as pivotal in steering the nation's economy towards stability and prosperity.

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Notable Quotes:

• Scott Bessent (02:16): "If we don't get this done, it's going to be the biggest tax cut in the history and excuse me, biggest tax hike in the history. United States, 4.5 trillion."

• Scott Bessent (04:02): "I'm a deficit hawk, but I'm also a realist."

• Michael Knowles (05:15): "They're counting as one of its great strengths. Unpredictability is wait and see when we get the announcement on April 2nd."

This episode provides listeners with an in-depth understanding of the current administration's economic strategies, highlighting the interplay between tax policies, fiscal responsibility, and trade initiatives aimed at bolstering the American economy.

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Note: This summary is based on the provided transcript and may not cover all aspects of the full podcast episode.

Transcript

[A]

It's wonderful to come to the White House. It's always wonderful to interview top administration officials. And it's especially wonderful to interview one of the most important men in the administration and in the world, the treasury secretary, Scott Bessa. Mr. Secretary, thank you so much for taking the time.

[B]

Thanks for having me.

[A]

So I'll just jump right in. You have made a priority, the reduction of long term interest rates and of mortgage rates. And since the inauguration, both of those have come down materially. So this has obviously been very effective. Why is it so important for those two objectives to be achieved?

[B]

Good. It's a great question and thanks for asking that. The Biden administration created an affordability crisis. And one of the key problems in the affordability crisis has been in a home affordability. A big component of home affordability is mortgage rates. So the Fed had to go on a very aggressive hiking cycle to bring down inflation. We hope that the Biden inflation is dead. We believe that everything President Trump's agenda is doing on the economy, the making the tax cuts permanent, bringing down the, bringing down regulation, cutting regulation, bringing down energy prices will contribute to lower rates. And so what we've seen, we've seen lower 10 year rates and we've also seen the spread between interest rates and mortgages come in. As we at treasury have talked about bank deregulation.

[A]

So you mentioned the tax cuts. I know that you've just met with the big six to try to make Trump's tax cuts both extended and expanded. And on the campaign trail, President Trump was proposing no tax on tips, no tax on Social Security. But you also have to deal with the fiscal hawks on Capitol Hill who are worried that that could exacerbate the budget deficit. So how are those talks progressing? Where do you think you're going to land? Not just on the, on the Trump tax cuts, but on the expansion.

[B]

Great. So again, very, very important question. And for us it's pass fail. If we don't get this done, it's going to be the biggest tax cut in the history and excuse me, biggest tax hike in the history. United States, 4.5 trillion. And you want to talk about blowing out the budget, the deficit, the long term projections, there'll be no coming back from that. And the economic calamity. And so when you talk about the big six, the big six that I lead, it's myself that Kevin Hassett, who's NSC chair, Leader Thune, Speaker Johnson, Senator Crapo and Chairman Jason Smith. And we've got a great relations, we had an incredibly productive meeting the other day. And I think the story that the mainstream media doesn't want to tell, we can see that the Democrats are broken and in disarray, but the Republicans are the opposite. And because of President Trump's leadership, Speaker Johnson did a great job. He got the reconciliation motion through the House. First time we got a clean continuing resolution bill, first vote, everyone said it couldn't be done. Now the Senate has the House instructions. They are going to put their stamp on it. And it was a very productive meeting. I was very impressed with Leader Thune's proposed timeline. And it looks like this could get done sometime in the early summer.

[A]

So in other words, with regard to the fiscal hawks, because it's pass fail, because the Republicans on Capitol Hill don't want to be responsible for the largest tax hike ever, you're confident that the bill will get through?

[B]

Look, at the end of the day, there's going to be something for everybody. There's going to be a very growth component. We're going to bring back the full expensing. We may put in expensing of factories to reshore manufacturing for the bottom 50% of wage earners who have got who been killed by the previous administration. As you mentioned, no tax on tips, no tax on Social Security, no tax. And overtime. We're going to make auto loans deductible again if your car is made in the United States. And that will also address the affordability crisis. And then we will have spending cuts. This Green New Deal is out of control. The CBO scored it at about 250 billion over 10 years. It's up 2 1/2 x. And there are people who think it's going to be over 1 trillion dol. So it's very easy to rein that in. And if you want to talk about deficit hawks, I'm a deficit hawk, but I'm also a realist. Every 300 billion that we cut is 1% of GDP we didn't get here in a year. And we're going to bring it down smartly over the next four years. Get back to the long term trend and try to balance the budget in 10.

[A]

Before I let you go, one question that comes up to my mind because you mentioned reshoring American manufacturing. Probably the single word that people are associating with President Trump's economic plan. Tariffs. I think he said that's his favorite word. And his second favorite word is reciprocal. So Trump has run on tariffs and there have been varying justifications for the tariffs. One, in order to reduce trade barriers from other countries so that we would then reduce our tariffs. We have more trade two, reshoring American manufacturing, three, raising revenue, all of which sound great to me. However, they do seem to be a little bit in conflict with each other. So if, for instance, if we reduce all the trade barriers, then you're probably not going to get the jobs, you're not going to get the revenue. If you do get the jobs. If we do reshore American manufacturing, that's great, but you're not going to get the revenue. So there are these competing desires that the tariffs could serve. As Treasury Secretary, how are you ranking those priorities?

[B]

Well, I don't do the ranking. President Trump does the ranking. And look, President Trump, if we go back, Alexander Hamilton was the original tariff man. Why did he do it? He did it to raise revenues for the new country and he did it to protect US Industry. President Trump has added a third leg for negotiations, whether it's closing the border to immigration, the fentanyl crisis or as a, as a way to prevent people from trading with Venezuela. So I think it'll become clearer after April 2nd. And to your part on reciprocal tariffs, the tariff component is just one component. I think if we were to look a lot of the state of stated tariffs are lower than one would think. But it's the non tariff barriers that happen both at the port of entry. It can be the usage standards, it can be food standards, it can be kind of made up safety standards that they hold our cars or products to that they don't get held to. So the non tariff barriers are going to be addressed. Also it could be the cheap labor, it can be government subsidies, it could be currency manipulation. So all of that is going to be included in the April 2nd. So you know, but I think what's really going to get the economy going, we're going to have the tariffs, we'll get more certainty on those from April 2nd onward and then early summer we're going to get this tax bill done.

[A]

You know, that's a very fitting answer for the Trump administration, which counts as one of its great strengths. Unpredictability is wait and see when we get the announcement on April 2nd. Wonderful. Mr. Secretary, thank you so much for taking good to see you.