All-In with Chamath, Jason, Sacks & Friedberg
Scott Bessent: Fixing the Fed, Tariffs for National Security, Solving Affordability in 2026
22 Dec 2025
Chapter 1: What is the main topic discussed in this episode?
Secretary Besant, welcome back to All In.
Chapter 2: 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.
Chapter 3: 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.
Chapter 4: 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.
Chapter 5: 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?
Chapter 6: 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,
Chapter 7: 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? It's someone with an open mind.
If we go back to the 1990s, Alan Greenspan did a magnificent job because he had an open mind that the internet... office modernization boom was going to create a productivity bonanza for the U.S. economy. And he let the economy, he let it rip. And we had an incredible economy, paid down a tremendous amount of debt that by 1998, 1999, with a combination of
Clinton administration having gotten religion, Newt Gingrich and his policies, there was talk at the end of the 90s that there might not be enough government debt to meet the needs of the financial system, which is the opposite of what we have now. So, again, I would... Part of it was just anything the president does must be wrong. Part of it was a failure of imagination.
And, you know, there's some very good studies coming out now that are showing why everyone has been wrong. The measurement problems on... the increase in goods prices. There's a study from not a friend of the administration, the San Francisco Fed, with 150 years of data, I would refer everyone to that, that shows that tariffs do not cause inflation, that they're actually disinflationary.
So has anybody read that study?
Scott, has that been, I would say, a part of the conversation in the administration now that there is this new revenue stream for the federal government, there's an opportunity to cut taxes and cut other sources of revenue for the federal government? and that could potentially accelerate the economy.
But balancing that question against the importance of cutting the deficit, how do you think about the balance between using tariffs as a mechanism for reducing the tax burden on the economy versus using the tariffs as an incremental revenue source for the federal government to start to reduce the deficit and pay down the debt eventually?
David, before I answer that, another thing I want to go back to is President Trump And one of the reasons for the success of the tariff policy, or I'll give you two reasons. One is that President Trump has used them for national security. So the tariff policy has become part of national security. He was able to use the tariffs to negotiate trade deals.
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Chapter 8: How are tariffs being used to reshape U.S. economic policy?
staples, and that appreciated by about 35%. So people are seething over the high price level. And as we saw in the inflation print this week, inflation is starting to turn down. And affordability is two parts. It is getting the price up. is under control. Some things we can decrease. Gasoline is coming down substantially. I would expect that it would come down much more.
Oil is down substantially. Gasoline follows it with a lag. Rents are down. And we are now seeing the effects of what 10 to 20 million undocumented people coming into the country did for rents. This mass unfettered immigration for D and C rent levels was through the roof. There's a study from Wharton that shows that 1% of Population increase in a city leads to 1% rent.
So we can see why rent went up, that if the migrants are going home, we are now seeing rents are down about 5%. I think that trend will continue. Again, the inflation numbers are starting to roll down. I think that they will. And then the other side is real incomes, which I think are starting to accelerate. Real incomes are up about 1.8% since President Trump took office.
And that's back to the Main Street question.
So just one quick follow-up there, and I'll give it back to my compatriots. We need more time. This is not a one-year project. This is going to take two or three years. And we're not going to gaslight you. and the numbers are looking good. On that note, we had the shutdown. October numbers were not complete. There's a bunch of reports now and hand-wringing over those numbers.
I think maybe you could address it, which is the BLS filled in a lot of the non-survey data sources with some zeros and potentially the criticism now or the concern on Wall Street and from analysts is that maybe this 2.7 number is over-optimistic. Maybe you could address people's concerns. And can we trust you with the numbers, I think is what Wall Street's saying.
Well, again, it's amazing when a good number comes out, then it switches to that. And Jason, just let me tell you, every Wall Street predictor on Bloomberg was wrong. So what do you do when you're wrong? You blame the measurement. You blame the data. And there's always a lot of imputed data. In any of these numbers, that's why we get revisions. And I'm looking at I was looking at the numbers.
And paradoxically, the two things that I think are coming down the fastest, which are rent. Also, it's known as the owner owner occupied funding or owner occupied rent. That was actually up on the month. I believe it is turned negative.
And then the other thing that was up was energy and gasoline, which we can, is an observable event that those prices have decreased substantially from September, October. So I actually think it was a pretty accurate number.
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