Scott Bessent: Fixing the Fed, Tariffs for National Security, Solving Affordability in 2026
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What is the main topic discussed in this episode?
Secretary Besant, welcome back to All In.
What were the key economic highlights of 2025?
We appreciate you taking the time to catch up with us and provide this first year in review. We're excited to have you here and hear how things are going and what's ahead regarding the fiscal condition of the US government, the economic condition of the US economy, including how things are going for Wall Street and Main Street.
How do tariffs serve as a tool for national security?
And finally, we'd like to broadly discuss some of the administration's policies, decisions, and how they're playing out or will play out from your point of view. I'll start us off and maybe to catch up on our last conversation, one of the things that I've cared deeply about and which you shared an objective around is getting... the budget deficit below 3% of GDP. I'd love to hear from your point of view how that's going and how things are looking for fiscal year 26, the actions that have been taken and what you think's ahead for that target.
Good to be with you. Happy to review the year, talk about next year. There's a lot going on. I would categorize 2025. We had some important victories, some important policy announcements. some important movement. But as I've described it, 2025 was setting the table. And especially on the economy, I think the feast and the banquet is going to be in 2026.
What factors are affecting affordability in 2026?
To start with the budget deficit, We didn't get much credit because it came out during the shutdown. The U.S. fiscal year is on September 30th. We had a slight fiscal contraction for the year. Wasn't much, but much better than the 2.1%. zero trillion that was estimated. We came down from about 1.8 trillion to 1.78.
What mistakes did the Fed make regarding the asset bubble?
So a contraction. Nonetheless, for the calendar year, we're making great progress. And just to put it in context, Biden administration, they blew things out trying to get Vice President Harris elected in the fourth quarter. So last year, 2024, 40% of the government spending occurred in the fourth quarter as they had the unsuccessful their unsuccessful attempt to convince voters that they weren't in a world of hurt. I forecast that we will have approximately a 200 to 300 billion fiscal contraction for the calendar year, which is between 0.7, 1% of GDP. We're going to end the year with nominal growth. close to 6%. So we will be bringing down the deficit to GDP. I believe it peaked 6.8% for the calendar year previous year, and we're going to be in the mid fives.
So it's a very good start on an important journey. And I've said that I would, by the time President Trumpley's office, that we would like to have something with a three in front of it, which will stabilize the deficit to GDP, which is an important number, and enable us to start paying down debt.
Scott, it seems like the tariffs have had an enormously positive impact. It's given you a lot of tools in the toolbox to work with. Why do you think so many people got it wrong? A lot of people I'm sure that you've known and worked with in your prior life as a hedge fund manager. What did they get wrong?
How is the administration focusing on Main Street over Wall Street?
What did they miss that you were able to see?
Well, a couple of things. I think people didn't have an open mind. They became the Trump tariffs, which immediately a large cohort, whether it was government officials, industry people, the general population, because President Trump wanted to do it, it must be bad. I said the other day, President Trump cured cancer but it caused dandruff, then people would say, well, you know, President Trump has caused a dandruff epidemic. And look, there's a lot of orthodoxy that hasn't worked. If we look back,
What impact did tax cuts have on the economy?
early 2000s, letting China into the global trading system, that they would become more like us. And there was a point, and I'm somewhat sympathetic to the people who believe that, but by 2013, when Xi Jinping came in, And great writers like Elizabeth Economy, who had been of that view, reversed and said, he's a different kind of cat. It's no longer going to be Chinese policies with capitalist tendencies. It's just going to go back to hard communism, Leninism. And I just think that It was a failure of imagination. I've said several times, people, and maybe we'll talk about it today, when people ask me, what are you looking for in a Fed chair?
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–0:02
2
What were the key economic highlights of 2025?
0:02–0:22
3
How do tariffs serve as a tool for national security?
0:22–1:20
4
What factors are affecting affordability in 2026?
1:20–1:46
5
What mistakes did the Fed make regarding the asset bubble?
1:46–3:35
6
How is the administration focusing on Main Street over Wall Street?
3:35–4:15
7
What impact did tax cuts have on the economy?
4:15–17:51
8
How are tariffs being used to reshape U.S. economic policy?
17:51–56:46
Speakers
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