March 5, 2025 • 28 mins
Former US Treasury Secretary Steve Mnuchin sits down with Bloomberg's David Rubenstein at the Bloomberg Invest Conference in New York City. They discuss taxes, strength of the dollar, private equity and more.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:07):
I want to get right now to former Treasury Secretary
Steve Manuchin sitting down with David Rubinstein here at the
invest conference.
Speaker 3 (00:13):
If you want, let's.
Speaker 1 (00:14):
Listen in something I like the idea of the ten
percent tariff across the board. It's a consumption tax on
foreign goods. But if you were to do that, he
should do that through the reconciliation process so that can
be scored.
Speaker 3 (00:26):
I think would raise about two and a.
Speaker 1 (00:27):
Half trillion dollars and could be used to pay for
tax cuts.
Speaker 3 (00:32):
As an example.
Speaker 2 (00:33):
Speaking of tax cuts, you engineered with President Trump the
very large tax cut of his first term. Do you
think a similar sized tax cut is essential now?
Speaker 1 (00:44):
Well, the biggest focus for them is just extending the
personal side of the tax cuts, which which are going
to expire.
Speaker 3 (00:51):
And I think.
Speaker 1 (00:52):
That that was a signature part of his first term
and I think that's got to be the priority to
continue now. On top of that, I know he wants
to do additional tax cuts, and that'll be a little
bit more challenging with the pay force.
Speaker 2 (01:05):
Or then the campaign, he talked about a couple other
tax cuts.
Speaker 3 (01:09):
One is no tax on tips.
Speaker 2 (01:12):
Are people getting tips actually paying a lot of taxes?
Speaker 3 (01:14):
I don't know.
Speaker 2 (01:14):
I mean cash they're getting out today, I don't know
how much they're paying, And maybe they're paying a lot
of tax Is that a big source of revenue? If
you are loss of revenue if you don't have tax
on tips, well.
Speaker 1 (01:24):
You know we're not in as much as a cash
society as we used to do. So there's a lot
of tips that go through an electronic mechanism. I think
if he wants to have a small carve out for
tax on tips.
Speaker 3 (01:37):
I think that makes sense.
Speaker 1 (01:38):
I think obviously, if you start giving tips to investment
bankers at the end of the year instead of bonuses
and they don't get taxed, that would be.
Speaker 3 (01:46):
A little bit more problematic.
Speaker 1 (01:47):
And you know, you could tax your lawyers, and so
I think if he does that, it needs to have
a small carve out.
Speaker 2 (01:55):
In the campaign, he also talked about I think no
tax on Social Security. Wouldn't that be pretty expensive? Very expensive?
And no tax on overtime too. I think he talked
about does that be expensive too? It would be okay.
So when you were working on the tax cut, when
you were Secretary of Trategy, how did you find the
intellectual level of the Ways and Means Committee members where
(02:16):
they really everyone understand everything you guys wanted to do.
And how was it like to engage with the Way
Means Committee?
Speaker 1 (02:23):
Well, I mean, there's no question, you know, when we
passed the tax cuts, and this was a lot of work,
we were very engaged with both the House and Senate,
and actually we had weekly meetings which was called the
Big Six. It was me and Gary Cohne from the
White House, it was the Senate, and it was the House.
And literally every week we sat down and went through details.
(02:44):
So I mean, as you know, I mean, we had
sweeping tax reform across everything. This time it is actually
a lot simpler. But I do think Secretary Besett needs
to be very focused on working with the House and
the Senate to get this across the finish line.
Speaker 2 (03:00):
In recent decades, the annual deficit has been fairly high.
I think under President Trump's first four years, I.
Speaker 3 (03:09):
Don't know exactly.
Speaker 2 (03:09):
I think it was maybe six to eight trillion dollars
of additional debt added to the total debt. We have
that thirty six trillion. Now, how are we going to
get the debt down? And the deficit down if we
have these big tax cuts.
Speaker 1 (03:22):
Well, David, let me just say I think the deficit
is probably the most important issue today in terms of
the long term impact on the economy. And just to
put this in perspective, in the first term, we had
debt to GDP ratio of about one hundred percent, and
with the tax cuts and the economic growth before COVID,
(03:42):
we were growing the economy faster than we were growing
the debt, so that ratio would have come down, and
I think we were trying to get it down to
ninety to ninety five. The big focus on the first
term was military spending. We unfortunately had to increase non
military spending to get it through the Huston's Senate. But
what really impacted us was COVID, and I think as
(04:04):
you know firsthand, you know, we had to spend a
lot of money in COVID or we would have had
a worldwide depression, not recession. I think the problem was,
you know, the first two trillion dollars was well spent,
the next two trillion we never should have spent, and
then the Biden administration kept on spending, so you know,
we have debt to GDP of close to one hundred
(04:25):
and twenty five percent today. That's a gigantic problem. Secretary
Besent has talked about getting the deficit down from six
percent to three percent of GDP, and that's got to
be a major focus. So if we're going to do
the tax cuts, we need to make sure there's pay
for us and we need to make sure there's economic growth.
Speaker 2 (04:44):
When Bob Rubin was Secretary of the Treasury, he once
talked about the value of the dollar, and he made
a mistake, he later would say, by talking about saying
something other than we want a strong dollar. And now
every Treasury secretary is told you can only say one
thing about the dollar, we want a strong dollar. But
what can former secretaries and Treasury say about that? Can
(05:05):
they say we want a strong dollar. Can you say,
maybe it should weeke in a little bit and to
make our exports easier to sell.
Speaker 1 (05:11):
Well, you know, it's funny that you say that, And
Bob really was kind of credited with the strong dollar policy,
and I think it's kind of every Treasury secretary after
that kind of you know, you got Treasury one oh
one training, and the first thing they told you was
just talk about a strong dollar. You know, actually, when
I was at Davos, I made a comment that I
(05:34):
come into it on a balanced, stable dollar as opposed
to saying a strong dollar, and all of a sudden,
the dollar moved significantly. Look, I think and now I
can talk a little bit more freely about this, But
I think on the long term it is important that
we have a strong dollar. The dollar is the reserve
(05:54):
currency of the world, and a strong dollar affects a
strong economy. In the short term, particularly because of trade.
You know, the strength of the dollar can have a
negative impact.
Speaker 3 (06:07):
But I think the most important thing.
Speaker 1 (06:09):
Is actually a stable dollar so that there's not volatility.
Speaker 2 (06:14):
Speaking of stable, what do you think about the Secretary
of Treasury or the US government supporting cryptocurrencies. They didn't
really have them so much when you were Secretary of Treasury,
but now cryptocurrencies seem to be very heavily supported by
President Trump and his administration.
Speaker 3 (06:30):
Do you have any comment on whether that's a good
or bad thing.
Speaker 1 (06:32):
Look, my view on crypto has been pretty consistent. We
did a lot of work on this in the first term.
If people want to buy crypto as an asset class
like they buy gold, that's fine. I personally don't wouldn't
invest in it, but that's fine to me. The bigger
issue has been making sure that crypto is not used
(06:53):
for illicit activities. And you know, we spent a long
time getting rid of Swiss numbered bank accounts, making sure
that we have a mechanism that crypto can be compliant
with BSA and all of our money laundering regulations, and
I have concerns today about that.
Speaker 2 (07:10):
You know, in the business world, investment world, if you
hire more fundraisers, you usually raise more money. In the
IRS world, if you get more agents, you usually raise
more money.
Speaker 3 (07:22):
But for some reason, the.
Speaker 2 (07:23):
Republican Party seems to want to have fewer agents, and
therefore they reduce the number of agents, and therefore maybe
they're not going to raise as much money. Do you
have a view on whether cutting back the IRS agents
that were put in under a President Biden is a
good thing to do or not.
Speaker 1 (07:37):
Well, I have a strong view on this. I spent
a lot of time overseeing the IRS. I mean, the
reason why Biden administration added so many agents, this is
the silly part of government math.
Speaker 3 (07:52):
So if they added all these agents.
Speaker 1 (07:55):
They were able to score it that they were going
to able to raise revenue in the future, sure, and
they spend that revenue today. So I actually don't think
we need more agents. What we need is a bigger
investment in technology in the irs.
Speaker 3 (08:10):
The systems are outdated.
Speaker 1 (08:12):
And I think in this day and age, there's a
lot we can do with technology that we don't need
physical agents auditing people. It can be done electronically.
Speaker 2 (08:22):
Now, is it possible for the DOOSE people to get
the individual tax returns of a particular person to who
they might not like or that's pretty impossible to do, well.
Speaker 3 (08:33):
It's not allowed.
Speaker 1 (08:35):
So the people are not allowed to get individual taxpayer information.
My understanding is that they can get access to anonymized information. Again,
I think it's it would be helpful for those to
help look at modernizing the technology. But obviously, you know,
looking at specific taxpayer information should not be allowed and
(08:57):
isn't allowed now.
Speaker 2 (08:59):
President Trump and his administration are very focused on the
trade deficit, which is very, very high these days. But
is the trade deficit that big a problem compared to
the budget deficit? If you were to worry about which deficit,
wouldn't be budget deficit be more important than a trade deficit.
Speaker 1 (09:13):
Well, as you said, we have what's called the twin deficits.
In my opinion, the budget deficit at two trillion dollars
annually is a much bigger problem.
Speaker 3 (09:23):
And I think, by the way, if you brought.
Speaker 1 (09:25):
Down the budget deficit, by definition, you'd bring down the
trade deficit because you'd have less demand for goods in general.
And I do think the idea of resetting trade relationships.
I mean, President Trump is right that the US market
has been opened for foreign trade, and foreign markets have
not been opened in the same way. You know, we
(09:47):
spent a lot of time with China on the Phase
one deal. They haven't lived up to that. But the
whole idea was if we could allow access to our
business to a growing China middle class, that's an enormous
opportunity for US business. And I do think kind of
a big part of the trade deficit is we don't
have fair trade in both directions.
Speaker 2 (10:07):
Now, President Trump has made a big push on getting
American companies and foreign companies to invest in the United
States manufacture things that would probably be somewhat inflationary because
by definition, if you have people producing things overseas, probably
because it's the lowest cost producer. If you bring them
back to the United States with higher labor costs, it'll
be a higher cost production, therefore maybe more inflationary. Despite that,
(10:30):
you think it's a good idea to have more things
manufacturing United States.
Speaker 1 (10:34):
Well, I definitely think US manufacturing jobs has always been
a big focus of his. I think you know, there
was a large part of the economy that was left behind,
and I.
Speaker 3 (10:44):
Do think that's a focus now.
Speaker 1 (10:45):
Obviously, there are different markets that can be competitive, so
I think we can have the same thing, but his
focus should be US investment.
Speaker 2 (10:54):
So when you became a Secretary of Treasury, there was
somebody on the Federal Reserve Board who had been appointed
by Obama, James J. Powell, who used to work at
my firm, and then you recommended him to President Trump,
I think, to be the chairman of the Federal Reserve.
President Trump was not happy with him at the beginning,
I guess, but I think he's going to keep him now.
I guess any regrets about recommending J. Powe or how
(11:18):
kind of job you think he's done.
Speaker 1 (11:20):
Well, let me first say, despite the fact that Obama
did appoint him, Jay was a Republican and is a Republican.
I had the opportunity to work with him really on
a lot of the regulatory issues at first when Jenny
Allen was chair and I do think Jay's done a
very good job.
Speaker 3 (11:38):
You know.
Speaker 1 (11:38):
As President Trump, he had a bunch of issues with
him raising rates. But then during COVID he did give
him the Most Improved Player Award when he dropped trades
down to zero at the time.
Speaker 2 (11:48):
So it generally the President of United States is not
supposed to talk to or lobby the Chairman of the Fed,
but the Secretary of treasurer usually meets regularly with the
Chairman of the Fed. They kind of talk about things
to some extent. Did you meet with him fairly regularly
and how would those conversations go when you met with
j Powe?
Speaker 3 (12:04):
I did?
Speaker 1 (12:05):
I mean we inherited a tradition which has been kept
up is that the Secretary of the Treasury and the
Chairman of the Fed meet weekly. It alternates every week
between being at the Treasury and the FED. And I
found those meetings very helpful. I mean a big focus
was obviously what we were doing on regulation monetary policy.
(12:26):
I never talked about monetary policy publicly, but yes, of course,
we did talk about those types of things. We talked
about the economy, and I think we had a very
good working relationship.
Speaker 3 (12:37):
So today, if you were J. Powe, would you lower
interest rates in the next six months or so?
Speaker 1 (12:42):
I think it's pretty clear the FED is going to
lower rates. So I mean, if you look at the
dot plot, which is what the FED governors have publicly said,
you do see rates coming down to about three in
a quarter, and you see the long term rate at
about two point eight. I do think the long term
rate between being closer to two and a half than three,
(13:05):
and I think we're going to see rates lowered next year.
And by the way, I think the ten year has
that already built in to the market. So I think
we're going to see three in a quarter three and
a half percent funds, and I think we'll see about
four percent ten year treasuries.
Speaker 2 (13:19):
So if President Trump were to call you and say
I need to have a new chairman of that FED
in May of twenty six, who would you recommend.
Speaker 1 (13:26):
Well, I have a bunch of ideas, but I'm not
going to say that publicly.
Speaker 3 (13:30):
I would say that privately to.
Speaker 2 (13:31):
Okay, So let's go to the next subject then, more
important than the policy of the economic policy of the
United States government is a subject called private equity. So
you left Secretary of Treasury and you start a private
equity firm, Liberty Strategic Capital. So is private equity as
fulfilling as you thought? I know you were in it
(13:53):
a bit before you became Secretary Treasury, But how do
you enjoy the private equity world?
Speaker 1 (13:58):
Well, David, you know, I've been in the investment business
and the markets businesses now for forty years, and I
think kind of every job I did kind of prepared
me more for the future. And when I became Treasury
as secretary, I think it was helpful that I had
a background in markets and risk. I had a background
(14:18):
I had been CEO of a bank.
Speaker 3 (14:20):
So that you know, I understood a lot of these issues.
Speaker 1 (14:24):
You know, we're small enough that we focus on a
handful of investments. We've done about ten investments to date.
And you know, I find it very interesting.
Speaker 2 (14:33):
You agree with my view that the highest calling of
mankind is private equity.
Speaker 3 (14:37):
I do not. You don't think so there's something more important,
but I don't know what it is. But okay, I.
Speaker 1 (14:41):
Would have thought you were going to tell me the
highest calling was to own a baseball team if.
Speaker 3 (14:46):
It's a winning team.
Speaker 2 (14:47):
Yes, But so let me ask you, when you your
Secretary of Treasury and you know, you're a very powerful person,
and then when you're on the private sector, you're going
and asking people for money who used to ask you for,
you know, information about what's going on. What is it
like to kind of make that switch to kind of
asking people for money who used to ask you for
(15:07):
not favors but more information or help.
Speaker 1 (15:12):
No, I mean, I mean, first of all, fortunately we're
we're not in the fundraising business.
Speaker 2 (15:18):
And you raised for your first fund about four billion
plus or something.
Speaker 1 (15:21):
Well I can't comment on the size of it and
things like that, but yes, we did raise our fund.
But you know what I find interesting now is actually
it's it's you know, when your Treasury secretary, and it's
extraordinary experience. But you can't publicly talk about a lot
of things, and there's limitations on what you can do.
So I find it actually quite interesting being involved in
(15:42):
different things now from the outside.
Speaker 2 (15:44):
Well, one of the pleasures of being Secretary of the
Treasury is you get your handwriting on the dollar bill
something like that. So some Secretary of Treasures had incomprehensible,
indecipherable handwritings, and they couldn't figure out who actually was
finding it. But what was the pleasure like of getting
a bills one hundred dollar bills or dollar bills and
(16:07):
having your.
Speaker 3 (16:07):
Signature on it? Was that fun or not?
Speaker 1 (16:09):
You know, David, I changed my signature because my signature
was completely illegible, okay, And I thought, if I'm going
to have my signature on the money forever, it would
be nice if you could see it and read it.
Speaker 3 (16:21):
So I simplified my signature a lot.
Speaker 1 (16:24):
I guess the question is is you know, I wonder
if President Trump wants his signature on the money.
Speaker 2 (16:33):
By the way, I have a similar problem, don't. I
can't do cursive because I think that was being taught
in the second grade when it was Jewish holidays and
I wasn't in school, so I can't really like cursive.
Speaker 3 (16:43):
So I don't have to worry about this. I'm not
gonna be Secretary and Treasury.
Speaker 2 (16:46):
But there is a proposal now to have a two
hundred and fifty dollars bill, a law of bills proposing
Congress with President Trump's picture on it. Usually you're supposed
to have passed away before you get your picture on it.
Speaker 3 (16:59):
But ye, many comment on that, or well.
Speaker 1 (17:02):
My only comment is, why would he pick two fifty.
Let's go for a thousand if they're going to pass
the law.
Speaker 2 (17:07):
Okay, Well, when you were Treasuring secretary, you did work
on I think having a woman on the dollar bill.
Was it the twenty dollars bill or or something. It
was going to be somebody, but it took years to
get it done. It hasn't happened yet. You actually think
there will be a woman on the dollar bill in
our lifetime?
Speaker 1 (17:23):
Well, David, you know what I was focused on, and
I knew it wasn't going to be my decision. It
was going to pass over. I don't know if it'll
be Scott Besson's or not. But what we were very
focused on the time is the issue around the dollar
and so that you couldn't replicate it, and the security
features of the dollar. And there are changes that I
(17:46):
can talk about that are in the works around the printing,
so that takes time, and that's the most important part
of the change.
Speaker 3 (17:54):
Now.
Speaker 2 (17:56):
One of the most important parts of the Treasury Code
i RS code is something called carried interest taxation. You're
probably familiar with that. I've heard about it a few
time times. I heard about it during the first I know,
I talked to you about it maybe a few times.
I don't remember exactly. But President Trump has never been
a big fan of that. I think you know, and
(18:17):
I think in this current speeches he's made about he
said he wanted to get rid of current carried interest
taxation and whatever benefit sports owners gets as well.
Speaker 3 (18:26):
I don't know exactly what they are.
Speaker 2 (18:27):
But so do you have a view on carried interest
now that you were in the private ecuy world. Do
you think we should preserve it or not preserve it
or you don't want to comment on it. Well, David,
there's going.
Speaker 1 (18:38):
To be a lot of pay fors in have to
be in the tax code, and they're going to look
at a lot of different things. I will say, first
of all, in the carried interest it doesn't raise a
lot of revenue. I mean, look, one of the issues,
as you know, on carried interest is if you have
two investors and we invested you know, fifty percent, you
(19:00):
invested fifty percent, we'd need to pay a.
Speaker 3 (19:03):
Certain amount to tax to the extent in it.
Speaker 1 (19:06):
You create a fund and we decide as opposed to
it being fifty to fifty, we're going to exchange profits.
It doesn't change the tax that the government collects. So
I think from an academic standpoint, you know there's a
reason behind this.
Speaker 3 (19:22):
From a revenue.
Speaker 1 (19:23):
Standpoint, that'll have to be something that Congress looks at.
Speaker 2 (19:26):
So what is the biggest pleasure you've gotten out of
having a private equity fund? Now you raised the fund,
You've made a number of investments. Are you enjoying us
as much as being Secretary treasurer or being a partner
at Goldman Sachs or not as much?
Speaker 1 (19:38):
I mean, David, all these experiences were really extraordinary. I mean,
what I find interesting about this is investing in businesses
and being able to impact certain businesses. You know, I've
had a long experience in banking. We made a big
investment that we bailed out and saved what was a
Flagstar bank. It was called New York Munity Bank at
(20:00):
the time. And you know, banking is something that's been
very interesting to me. So this is the second time
I did this. During the financial crisis, we bought several banks.
Speaker 3 (20:09):
Indie BFD, I see Indie Bank Bank.
Speaker 2 (20:11):
Okay, So what are the areas you're focused on? Is
the financial services? Cyber what of.
Speaker 1 (20:16):
The area technology and financial services are to major focus?
Speaker 3 (20:21):
Okay?
Speaker 2 (20:21):
And entertainment you did a lot of that when you
were before you were Secretary Treagery.
Speaker 3 (20:25):
Doing any of those kind of innesement. We do a
little bit of it.
Speaker 1 (20:28):
I mean we've been, you know, big investors over time
in content. When I was investing in movies, it was
more actually a technology play and understanding bandwidth to the
home and the demand for content.
Speaker 2 (20:38):
Hey, so today when people invest in private equity, the
kind of rates of return they expect are probably lower
than they were twenty years ago when more leverage was
used and whole writing of other things. But you think
somebody investing in private equity today with a reputable firm
should get a rate of return in the load of
mid teens.
Speaker 3 (20:55):
Something like that, a little bit higher higher than that. Yes,
with you, well, I can't comment on me, but i'd
say I would say in just mid to higher teams. Yes, okay.
Speaker 2 (21:06):
And today, in your view, is Congress likely to deal
with the budget deficit in a way where we won't
have to deal with the government shutting down, and do
you think that's a real risk that the government could
shut down again?
Speaker 1 (21:22):
Look, I'd say, you know, there's two issues that again
that I spent a lot of time on, both the
debt ceiling in government funding and you know the issue
here and you know the government. So as treasury, we
could have the money and not be able to spend
it because of government funding, or we could have the
(21:45):
government funding but not have enough money because.
Speaker 3 (21:48):
Of the dead ceiling.
Speaker 1 (21:49):
My major focus was the debt ceiling, and one of
the things I think now is the most important issue
is the Republicans need to get the dead ceiling into
a reconciliation quickly and raise the dead ceiling.
Speaker 2 (22:02):
In nineteen seventeen, the death ceiling was first imposed, and
we've now raised it more than ninety times. President Trump
has said before we should get rid of the dead ceiling,
and we're the only country in the world with one
other than Denmark. So what is your view on do
we need a dead ceiling because we can we changed
it all the time anyway, or should we just keep
the death ceiling.
Speaker 1 (22:23):
Well, given the side of the debt that we have
today and the focus on the debt, I would keep
the dead ceiling. I think it's an important mechanism. It's
become too political. But I think spending and the dead
ceiling should be passed at the same time. So whenever
Congress passes whatever the spending is, they should simultaneously pass
(22:44):
the dead ceiling so that you can afford to pay
for that. But I don't think, you know, unlimited spending
is a good thing. As I mentioned earlier, you know COVID,
we had to do trillion dollars spending. We then got
spending out of control, and we need to get that
back into control.
Speaker 3 (23:01):
Now.
Speaker 2 (23:01):
Many countries around the world have something called a sovereign
wealth fund, and the United States doesn't have that. We
have the printing press, we print dollars and people buy
those dollars, but we don't have a sovereign wealth fund.
President Trump has signed an executive order I think, creating
a sovereign wealth fund. But where will the money come
from for that sovereign wealth fund?
Speaker 1 (23:21):
Well, David, as you know, most countries that have sovereign
wealth funds are because they have certain resources today that
are going to be limited. Obviously, oil and energy is
a big focus and the purpose of the sovereign Wealth
Fund is to capture a huge amount of those revenues
today so that it can be spent over generations.
Speaker 3 (23:41):
The US is not in that situation.
Speaker 1 (23:43):
So if we're going to have a sovereign wealth fund,
I think obviously we'd have to borrow to put the
money in the sovereign wealth fund since we don't have
a surplus. And if we did that, I think you
should be very limited in scope. For are there certain
areas that we need government support. It shouldn't be used,
obviously to crowd out private investments.
Speaker 2 (24:04):
The third rail of American politics was thought to be
the social security system and medicare. Some people say, ultimately
we were running out of money to fund the social
security system because people are living longer and so forth,
and we have more people retiring and then living longer.
Are you worried about the security of the subsecurity.
Speaker 1 (24:24):
System, David, One of the big titles I had in
government was managing Trustee of the Social Security Trust Fund.
And when I got there, I thought I actually could
do a lot of good. And one of the things
I was actually very focused on. Social Security still has
paper cards, and I thought one of the most ridiculous
(24:45):
thing is the Social Security number is the identifier most
people use. I wanted to focus on creating electronic ID
and I think that's still something we should do now.
As it relates to the Trust Fund, we did sure
report every year. The Trust Fund is going to run
out of money, and I think it's something that Congress
has to deal with. I hope that in the second
(25:07):
half of the president's term he can focus on social
security reform because it's a problem. The fund is going
to run out of money and there's lots of people
who alive upon it, so it needs to be fixed.
Speaker 2 (25:20):
In the second half of this term, he might have
a different House of Representatives. Historically, the first midterm election
a president usually loses about twenty five seats in the House.
There's no evidence in what will happen now, but if
President Trump were to lose control of the House, do
you think that would affect his agenda great deal in
(25:40):
terms of sociecurity reform other things, And therefore he needs
to get everything done in the first two years that
he really wants to get done well.
Speaker 1 (25:46):
First of all, as you know, the House with a
very small majority in the House, So yes, I do
think for the first two years, he has to focus
on what are the most important legislative agendas. Obviously, border
security something he's very focused on. I know there's been
this talk of one bill or two bills. Personally, I
would do two bills. I think he can have a
(26:07):
very quick win on border security and get that done
through the reconciliation. Tax reform is more complicated, so I
think that's going to take a good part of the year.
He could get the debt ceiling into the first bill.
He can then get all his taxes done in the
second bill. I think on something like social Security, you're
going to need bipartisan support.
Speaker 3 (26:29):
You're not going to want to attack that.
Speaker 1 (26:31):
Now that's something so it doesn't matter who controls Congress
for that.
Speaker 2 (26:36):
You know, a bus mark. I think it used to
said that there's two things you don't want to see
being made are sausage and legislation. And what is it
like when you're doing tax bills. You're sitting in a
smoke filled room and you're sitting there with the members
of Congress and they say I'll give you this and
you give me this, And how.
Speaker 3 (26:55):
Does that really work? Is a trade offs er?
Speaker 2 (26:57):
Everybody says, we just have to do what's best for
the American peer people, and we're not going to do
any trade offs or deals.
Speaker 1 (27:03):
Well, first of all, there are no smoke filled rooms.
That may have happened in the past, but at least
when I was there, nobody was smoking. No, I think
that you know it said, you know, we worked very
closely with the House and Senate. These are huge complicated issues.
Of course there have to be trade offs. You have
to think of how they were paid for us. I
mean when we did this the first time, it was
a trillion and a half dollars static, trillion dollars dynamic,
(27:28):
and we had about five hundred billion in what we
considered to be baseline issues. So of course there have
to be trade offs. And then I would just comment
on even once the tax reform was passed, we spent
the next year writing tax regulations and Treasury which is
a very important function to institute the law.
Speaker 2 (27:46):
So if you were king for today and you can
make any change in the way the economy, the finance
structured the United States is based, the spending is done.
What would be the one thing that you think we
should do to make our economy better or make our
financial system better than it is today.
Speaker 3 (28:01):
One thing, I would reform.
Speaker 1 (28:04):
The spending process and the debt sealing process so that
there was a real process of the administration having a budget,
that budget going through Congress every year, and that kind
of the focus around spending.
Speaker 2 (28:20):
Okay, so for the time being, you're going to be
in the private sector, you're not going to be drafted
back in the government, and you're happy with the highest
calling of mankind that you're now pursuing private equity.
Speaker 1 (28:30):
Right the highest calling was serving the people in the environment.
I know you think this is the highest time, David.
I know you've been terrific in advising and helping presidents,
and I'm sure you'll also give President Trump a bunch
of advice.
Speaker 2 (28:45):
Well, I don't know if he needs my advice. Certainly
not on the Kenney Center, probably, but we'll see. Okay, Okay,
I think we're out of time. So we're out of time, right, Okay, see,
thank you very much, thank you,
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:07):
I want to get right now to former Treasury Secretary
Steve Manuchin sitting down with David Rubinstein here at the
invest conference.
Speaker 3 (00:13):
If you want, let's.
Speaker 1 (00:14):
Listen in something I like the idea of the ten
percent tariff across the board. It's a consumption tax on
foreign goods. But if you were to do that, he
should do that through the reconciliation process so that can
be scored.
Speaker 3 (00:26):
I think would raise about two and a.
Speaker 1 (00:27):
Half trillion dollars and could be used to pay for
tax cuts.
Speaker 3 (00:32):
As an example.
Speaker 2 (00:33):
Speaking of tax cuts, you engineered with President Trump the
very large tax cut of his first term. Do you
think a similar sized tax cut is essential now?
Speaker 1 (00:44):
Well, the biggest focus for them is just extending the
personal side of the tax cuts, which which are going
to expire.
Speaker 3 (00:51):
And I think.
Speaker 1 (00:52):
That that was a signature part of his first term
and I think that's got to be the priority to
continue now. On top of that, I know he wants
to do additional tax cuts, and that'll be a little
bit more challenging with the pay force.
Speaker 2 (01:05):
Or then the campaign, he talked about a couple other
tax cuts.
Speaker 3 (01:09):
One is no tax on tips.
Speaker 2 (01:12):
Are people getting tips actually paying a lot of taxes?
Speaker 3 (01:14):
I don't know.
Speaker 2 (01:14):
I mean cash they're getting out today, I don't know
how much they're paying, And maybe they're paying a lot
of tax Is that a big source of revenue? If
you are loss of revenue if you don't have tax
on tips, well.
Speaker 1 (01:24):
You know we're not in as much as a cash
society as we used to do. So there's a lot
of tips that go through an electronic mechanism. I think
if he wants to have a small carve out for
tax on tips.
Speaker 3 (01:37):
I think that makes sense.
Speaker 1 (01:38):
I think obviously, if you start giving tips to investment
bankers at the end of the year instead of bonuses
and they don't get taxed, that would be.
Speaker 3 (01:46):
A little bit more problematic.
Speaker 1 (01:47):
And you know, you could tax your lawyers, and so
I think if he does that, it needs to have
a small carve out.
Speaker 2 (01:55):
In the campaign, he also talked about I think no
tax on Social Security. Wouldn't that be pretty expensive? Very expensive?
And no tax on overtime too. I think he talked
about does that be expensive too? It would be okay.
So when you were working on the tax cut, when
you were Secretary of Trategy, how did you find the
intellectual level of the Ways and Means Committee members where
(02:16):
they really everyone understand everything you guys wanted to do.
And how was it like to engage with the Way
Means Committee?
Speaker 1 (02:23):
Well, I mean, there's no question, you know, when we
passed the tax cuts, and this was a lot of work,
we were very engaged with both the House and Senate,
and actually we had weekly meetings which was called the
Big Six. It was me and Gary Cohne from the
White House, it was the Senate, and it was the House.
And literally every week we sat down and went through details.
(02:44):
So I mean, as you know, I mean, we had
sweeping tax reform across everything. This time it is actually
a lot simpler. But I do think Secretary Besett needs
to be very focused on working with the House and
the Senate to get this across the finish line.
Speaker 2 (03:00):
In recent decades, the annual deficit has been fairly high.
I think under President Trump's first four years, I.
Speaker 3 (03:09):
Don't know exactly.
Speaker 2 (03:09):
I think it was maybe six to eight trillion dollars
of additional debt added to the total debt. We have
that thirty six trillion. Now, how are we going to
get the debt down? And the deficit down if we
have these big tax cuts.
Speaker 1 (03:22):
Well, David, let me just say I think the deficit
is probably the most important issue today in terms of
the long term impact on the economy. And just to
put this in perspective, in the first term, we had
debt to GDP ratio of about one hundred percent, and
with the tax cuts and the economic growth before COVID,
(03:42):
we were growing the economy faster than we were growing
the debt, so that ratio would have come down, and
I think we were trying to get it down to
ninety to ninety five. The big focus on the first
term was military spending. We unfortunately had to increase non
military spending to get it through the Huston's Senate. But
what really impacted us was COVID, and I think as
(04:04):
you know firsthand, you know, we had to spend a
lot of money in COVID or we would have had
a worldwide depression, not recession. I think the problem was,
you know, the first two trillion dollars was well spent,
the next two trillion we never should have spent, and
then the Biden administration kept on spending, so you know,
we have debt to GDP of close to one hundred
(04:25):
and twenty five percent today. That's a gigantic problem. Secretary
Besent has talked about getting the deficit down from six
percent to three percent of GDP, and that's got to
be a major focus. So if we're going to do
the tax cuts, we need to make sure there's pay
for us and we need to make sure there's economic growth.
Speaker 2 (04:44):
When Bob Rubin was Secretary of the Treasury, he once
talked about the value of the dollar, and he made
a mistake, he later would say, by talking about saying
something other than we want a strong dollar. And now
every Treasury secretary is told you can only say one
thing about the dollar, we want a strong dollar. But
what can former secretaries and Treasury say about that? Can
(05:05):
they say we want a strong dollar. Can you say,
maybe it should weeke in a little bit and to
make our exports easier to sell.
Speaker 1 (05:11):
Well, you know, it's funny that you say that, And
Bob really was kind of credited with the strong dollar policy,
and I think it's kind of every Treasury secretary after
that kind of you know, you got Treasury one oh
one training, and the first thing they told you was
just talk about a strong dollar. You know, actually, when
I was at Davos, I made a comment that I
(05:34):
come into it on a balanced, stable dollar as opposed
to saying a strong dollar, and all of a sudden,
the dollar moved significantly. Look, I think and now I
can talk a little bit more freely about this, But
I think on the long term it is important that
we have a strong dollar. The dollar is the reserve
(05:54):
currency of the world, and a strong dollar affects a
strong economy. In the short term, particularly because of trade.
You know, the strength of the dollar can have a
negative impact.
Speaker 3 (06:07):
But I think the most important thing.
Speaker 1 (06:09):
Is actually a stable dollar so that there's not volatility.
Speaker 2 (06:14):
Speaking of stable, what do you think about the Secretary
of Treasury or the US government supporting cryptocurrencies. They didn't
really have them so much when you were Secretary of Treasury,
but now cryptocurrencies seem to be very heavily supported by
President Trump and his administration.
Speaker 3 (06:30):
Do you have any comment on whether that's a good
or bad thing.
Speaker 1 (06:32):
Look, my view on crypto has been pretty consistent. We
did a lot of work on this in the first term.
If people want to buy crypto as an asset class
like they buy gold, that's fine. I personally don't wouldn't
invest in it, but that's fine to me. The bigger
issue has been making sure that crypto is not used
(06:53):
for illicit activities. And you know, we spent a long
time getting rid of Swiss numbered bank accounts, making sure
that we have a mechanism that crypto can be compliant
with BSA and all of our money laundering regulations, and
I have concerns today about that.
Speaker 2 (07:10):
You know, in the business world, investment world, if you
hire more fundraisers, you usually raise more money. In the
IRS world, if you get more agents, you usually raise
more money.
Speaker 3 (07:22):
But for some reason, the.
Speaker 2 (07:23):
Republican Party seems to want to have fewer agents, and
therefore they reduce the number of agents, and therefore maybe
they're not going to raise as much money. Do you
have a view on whether cutting back the IRS agents
that were put in under a President Biden is a
good thing to do or not.
Speaker 1 (07:37):
Well, I have a strong view on this. I spent
a lot of time overseeing the IRS. I mean, the
reason why Biden administration added so many agents, this is
the silly part of government math.
Speaker 3 (07:52):
So if they added all these agents.
Speaker 1 (07:55):
They were able to score it that they were going
to able to raise revenue in the future, sure, and
they spend that revenue today. So I actually don't think
we need more agents. What we need is a bigger
investment in technology in the irs.
Speaker 3 (08:10):
The systems are outdated.
Speaker 1 (08:12):
And I think in this day and age, there's a
lot we can do with technology that we don't need
physical agents auditing people. It can be done electronically.
Speaker 2 (08:22):
Now, is it possible for the DOOSE people to get
the individual tax returns of a particular person to who
they might not like or that's pretty impossible to do, well.
Speaker 3 (08:33):
It's not allowed.
Speaker 1 (08:35):
So the people are not allowed to get individual taxpayer information.
My understanding is that they can get access to anonymized information. Again,
I think it's it would be helpful for those to
help look at modernizing the technology. But obviously, you know,
looking at specific taxpayer information should not be allowed and
(08:57):
isn't allowed now.
Speaker 2 (08:59):
President Trump and his administration are very focused on the
trade deficit, which is very, very high these days. But
is the trade deficit that big a problem compared to
the budget deficit? If you were to worry about which deficit,
wouldn't be budget deficit be more important than a trade deficit.
Speaker 1 (09:13):
Well, as you said, we have what's called the twin deficits.
In my opinion, the budget deficit at two trillion dollars
annually is a much bigger problem.
Speaker 3 (09:23):
And I think, by the way, if you brought.
Speaker 1 (09:25):
Down the budget deficit, by definition, you'd bring down the
trade deficit because you'd have less demand for goods in general.
And I do think the idea of resetting trade relationships.
I mean, President Trump is right that the US market
has been opened for foreign trade, and foreign markets have
not been opened in the same way. You know, we
(09:47):
spent a lot of time with China on the Phase
one deal. They haven't lived up to that. But the
whole idea was if we could allow access to our
business to a growing China middle class, that's an enormous
opportunity for US business. And I do think kind of
a big part of the trade deficit is we don't
have fair trade in both directions.
Speaker 2 (10:07):
Now, President Trump has made a big push on getting
American companies and foreign companies to invest in the United
States manufacture things that would probably be somewhat inflationary because
by definition, if you have people producing things overseas, probably
because it's the lowest cost producer. If you bring them
back to the United States with higher labor costs, it'll
be a higher cost production, therefore maybe more inflationary. Despite that,
(10:30):
you think it's a good idea to have more things
manufacturing United States.
Speaker 1 (10:34):
Well, I definitely think US manufacturing jobs has always been
a big focus of his. I think you know, there
was a large part of the economy that was left behind,
and I.
Speaker 3 (10:44):
Do think that's a focus now.
Speaker 1 (10:45):
Obviously, there are different markets that can be competitive, so
I think we can have the same thing, but his
focus should be US investment.
Speaker 2 (10:54):
So when you became a Secretary of Treasury, there was
somebody on the Federal Reserve Board who had been appointed
by Obama, James J. Powell, who used to work at
my firm, and then you recommended him to President Trump,
I think, to be the chairman of the Federal Reserve.
President Trump was not happy with him at the beginning,
I guess, but I think he's going to keep him now.
I guess any regrets about recommending J. Powe or how
(11:18):
kind of job you think he's done.
Speaker 1 (11:20):
Well, let me first say, despite the fact that Obama
did appoint him, Jay was a Republican and is a Republican.
I had the opportunity to work with him really on
a lot of the regulatory issues at first when Jenny
Allen was chair and I do think Jay's done a
very good job.
Speaker 3 (11:38):
You know.
Speaker 1 (11:38):
As President Trump, he had a bunch of issues with
him raising rates. But then during COVID he did give
him the Most Improved Player Award when he dropped trades
down to zero at the time.
Speaker 2 (11:48):
So it generally the President of United States is not
supposed to talk to or lobby the Chairman of the Fed,
but the Secretary of treasurer usually meets regularly with the
Chairman of the Fed. They kind of talk about things
to some extent. Did you meet with him fairly regularly
and how would those conversations go when you met with
j Powe?
Speaker 3 (12:04):
I did?
Speaker 1 (12:05):
I mean we inherited a tradition which has been kept
up is that the Secretary of the Treasury and the
Chairman of the Fed meet weekly. It alternates every week
between being at the Treasury and the FED. And I
found those meetings very helpful. I mean a big focus
was obviously what we were doing on regulation monetary policy.
(12:26):
I never talked about monetary policy publicly, but yes, of course,
we did talk about those types of things. We talked
about the economy, and I think we had a very
good working relationship.
Speaker 3 (12:37):
So today, if you were J. Powe, would you lower
interest rates in the next six months or so?
Speaker 1 (12:42):
I think it's pretty clear the FED is going to
lower rates. So I mean, if you look at the
dot plot, which is what the FED governors have publicly said,
you do see rates coming down to about three in
a quarter, and you see the long term rate at
about two point eight. I do think the long term
rate between being closer to two and a half than three,
(13:05):
and I think we're going to see rates lowered next year.
And by the way, I think the ten year has
that already built in to the market. So I think
we're going to see three in a quarter three and
a half percent funds, and I think we'll see about
four percent ten year treasuries.
Speaker 2 (13:19):
So if President Trump were to call you and say
I need to have a new chairman of that FED
in May of twenty six, who would you recommend.
Speaker 1 (13:26):
Well, I have a bunch of ideas, but I'm not
going to say that publicly.
Speaker 3 (13:30):
I would say that privately to.
Speaker 2 (13:31):
Okay, So let's go to the next subject then, more
important than the policy of the economic policy of the
United States government is a subject called private equity. So
you left Secretary of Treasury and you start a private
equity firm, Liberty Strategic Capital. So is private equity as
fulfilling as you thought? I know you were in it
(13:53):
a bit before you became Secretary Treasury, But how do
you enjoy the private equity world?
Speaker 1 (13:58):
Well, David, you know, I've been in the investment business
and the markets businesses now for forty years, and I
think kind of every job I did kind of prepared
me more for the future. And when I became Treasury
as secretary, I think it was helpful that I had
a background in markets and risk. I had a background
(14:18):
I had been CEO of a bank.
Speaker 3 (14:20):
So that you know, I understood a lot of these issues.
Speaker 1 (14:24):
You know, we're small enough that we focus on a
handful of investments. We've done about ten investments to date.
And you know, I find it very interesting.
Speaker 2 (14:33):
You agree with my view that the highest calling of
mankind is private equity.
Speaker 3 (14:37):
I do not. You don't think so there's something more important,
but I don't know what it is. But okay, I.
Speaker 1 (14:41):
Would have thought you were going to tell me the
highest calling was to own a baseball team if.
Speaker 3 (14:46):
It's a winning team.
Speaker 2 (14:47):
Yes, But so let me ask you, when you your
Secretary of Treasury and you know, you're a very powerful person,
and then when you're on the private sector, you're going
and asking people for money who used to ask you for,
you know, information about what's going on. What is it
like to kind of make that switch to kind of
asking people for money who used to ask you for
(15:07):
not favors but more information or help.
Speaker 1 (15:12):
No, I mean, I mean, first of all, fortunately we're
we're not in the fundraising business.
Speaker 2 (15:18):
And you raised for your first fund about four billion
plus or something.
Speaker 1 (15:21):
Well I can't comment on the size of it and
things like that, but yes, we did raise our fund.
But you know what I find interesting now is actually
it's it's you know, when your Treasury secretary, and it's
extraordinary experience. But you can't publicly talk about a lot
of things, and there's limitations on what you can do.
So I find it actually quite interesting being involved in
(15:42):
different things now from the outside.
Speaker 2 (15:44):
Well, one of the pleasures of being Secretary of the
Treasury is you get your handwriting on the dollar bill
something like that. So some Secretary of Treasures had incomprehensible,
indecipherable handwritings, and they couldn't figure out who actually was
finding it. But what was the pleasure like of getting
a bills one hundred dollar bills or dollar bills and
(16:07):
having your.
Speaker 3 (16:07):
Signature on it? Was that fun or not?
Speaker 1 (16:09):
You know, David, I changed my signature because my signature
was completely illegible, okay, And I thought, if I'm going
to have my signature on the money forever, it would
be nice if you could see it and read it.
Speaker 3 (16:21):
So I simplified my signature a lot.
Speaker 1 (16:24):
I guess the question is is you know, I wonder
if President Trump wants his signature on the money.
Speaker 2 (16:33):
By the way, I have a similar problem, don't. I
can't do cursive because I think that was being taught
in the second grade when it was Jewish holidays and
I wasn't in school, so I can't really like cursive.
Speaker 3 (16:43):
So I don't have to worry about this. I'm not
gonna be Secretary and Treasury.
Speaker 2 (16:46):
But there is a proposal now to have a two
hundred and fifty dollars bill, a law of bills proposing
Congress with President Trump's picture on it. Usually you're supposed
to have passed away before you get your picture on it.
Speaker 3 (16:59):
But ye, many comment on that, or well.
Speaker 1 (17:02):
My only comment is, why would he pick two fifty.
Let's go for a thousand if they're going to pass
the law.
Speaker 2 (17:07):
Okay, Well, when you were Treasuring secretary, you did work
on I think having a woman on the dollar bill.
Was it the twenty dollars bill or or something. It
was going to be somebody, but it took years to
get it done. It hasn't happened yet. You actually think
there will be a woman on the dollar bill in
our lifetime?
Speaker 1 (17:23):
Well, David, you know what I was focused on, and
I knew it wasn't going to be my decision. It
was going to pass over. I don't know if it'll
be Scott Besson's or not. But what we were very
focused on the time is the issue around the dollar
and so that you couldn't replicate it, and the security
features of the dollar. And there are changes that I
(17:46):
can talk about that are in the works around the printing,
so that takes time, and that's the most important part
of the change.
Speaker 3 (17:54):
Now.
Speaker 2 (17:56):
One of the most important parts of the Treasury Code
i RS code is something called carried interest taxation. You're
probably familiar with that. I've heard about it a few
time times. I heard about it during the first I know,
I talked to you about it maybe a few times.
I don't remember exactly. But President Trump has never been
a big fan of that. I think you know, and
(18:17):
I think in this current speeches he's made about he
said he wanted to get rid of current carried interest
taxation and whatever benefit sports owners gets as well.
Speaker 3 (18:26):
I don't know exactly what they are.
Speaker 2 (18:27):
But so do you have a view on carried interest
now that you were in the private ecuy world. Do
you think we should preserve it or not preserve it
or you don't want to comment on it. Well, David,
there's going.
Speaker 1 (18:38):
To be a lot of pay fors in have to
be in the tax code, and they're going to look
at a lot of different things. I will say, first
of all, in the carried interest it doesn't raise a
lot of revenue. I mean, look, one of the issues,
as you know, on carried interest is if you have
two investors and we invested you know, fifty percent, you
(19:00):
invested fifty percent, we'd need to pay a.
Speaker 3 (19:03):
Certain amount to tax to the extent in it.
Speaker 1 (19:06):
You create a fund and we decide as opposed to
it being fifty to fifty, we're going to exchange profits.
It doesn't change the tax that the government collects. So
I think from an academic standpoint, you know there's a
reason behind this.
Speaker 3 (19:22):
From a revenue.
Speaker 1 (19:23):
Standpoint, that'll have to be something that Congress looks at.
Speaker 2 (19:26):
So what is the biggest pleasure you've gotten out of
having a private equity fund? Now you raised the fund,
You've made a number of investments. Are you enjoying us
as much as being Secretary treasurer or being a partner
at Goldman Sachs or not as much?
Speaker 1 (19:38):
I mean, David, all these experiences were really extraordinary. I mean,
what I find interesting about this is investing in businesses
and being able to impact certain businesses. You know, I've
had a long experience in banking. We made a big
investment that we bailed out and saved what was a
Flagstar bank. It was called New York Munity Bank at
(20:00):
the time. And you know, banking is something that's been
very interesting to me. So this is the second time
I did this. During the financial crisis, we bought several banks.
Speaker 3 (20:09):
Indie BFD, I see Indie Bank Bank.
Speaker 2 (20:11):
Okay, So what are the areas you're focused on? Is
the financial services? Cyber what of.
Speaker 1 (20:16):
The area technology and financial services are to major focus?
Speaker 3 (20:21):
Okay?
Speaker 2 (20:21):
And entertainment you did a lot of that when you
were before you were Secretary Treagery.
Speaker 3 (20:25):
Doing any of those kind of innesement. We do a
little bit of it.
Speaker 1 (20:28):
I mean we've been, you know, big investors over time
in content. When I was investing in movies, it was
more actually a technology play and understanding bandwidth to the
home and the demand for content.
Speaker 2 (20:38):
Hey, so today when people invest in private equity, the
kind of rates of return they expect are probably lower
than they were twenty years ago when more leverage was
used and whole writing of other things. But you think
somebody investing in private equity today with a reputable firm
should get a rate of return in the load of
mid teens.
Speaker 3 (20:55):
Something like that, a little bit higher higher than that. Yes,
with you, well, I can't comment on me, but i'd
say I would say in just mid to higher teams. Yes, okay.
Speaker 2 (21:06):
And today, in your view, is Congress likely to deal
with the budget deficit in a way where we won't
have to deal with the government shutting down, and do
you think that's a real risk that the government could
shut down again?
Speaker 1 (21:22):
Look, I'd say, you know, there's two issues that again
that I spent a lot of time on, both the
debt ceiling in government funding and you know the issue
here and you know the government. So as treasury, we
could have the money and not be able to spend
it because of government funding, or we could have the
(21:45):
government funding but not have enough money because.
Speaker 3 (21:48):
Of the dead ceiling.
Speaker 1 (21:49):
My major focus was the debt ceiling, and one of
the things I think now is the most important issue
is the Republicans need to get the dead ceiling into
a reconciliation quickly and raise the dead ceiling.
Speaker 2 (22:02):
In nineteen seventeen, the death ceiling was first imposed, and
we've now raised it more than ninety times. President Trump
has said before we should get rid of the dead ceiling,
and we're the only country in the world with one
other than Denmark. So what is your view on do
we need a dead ceiling because we can we changed
it all the time anyway, or should we just keep
the death ceiling.
Speaker 1 (22:23):
Well, given the side of the debt that we have
today and the focus on the debt, I would keep
the dead ceiling. I think it's an important mechanism. It's
become too political. But I think spending and the dead
ceiling should be passed at the same time. So whenever
Congress passes whatever the spending is, they should simultaneously pass
(22:44):
the dead ceiling so that you can afford to pay
for that. But I don't think, you know, unlimited spending
is a good thing. As I mentioned earlier, you know COVID,
we had to do trillion dollars spending. We then got
spending out of control, and we need to get that
back into control.
Speaker 3 (23:01):
Now.
Speaker 2 (23:01):
Many countries around the world have something called a sovereign
wealth fund, and the United States doesn't have that. We
have the printing press, we print dollars and people buy
those dollars, but we don't have a sovereign wealth fund.
President Trump has signed an executive order I think, creating
a sovereign wealth fund. But where will the money come
from for that sovereign wealth fund?
Speaker 1 (23:21):
Well, David, as you know, most countries that have sovereign
wealth funds are because they have certain resources today that
are going to be limited. Obviously, oil and energy is
a big focus and the purpose of the sovereign Wealth
Fund is to capture a huge amount of those revenues
today so that it can be spent over generations.
Speaker 3 (23:41):
The US is not in that situation.
Speaker 1 (23:43):
So if we're going to have a sovereign wealth fund,
I think obviously we'd have to borrow to put the
money in the sovereign wealth fund since we don't have
a surplus. And if we did that, I think you
should be very limited in scope. For are there certain
areas that we need government support. It shouldn't be used,
obviously to crowd out private investments.
Speaker 2 (24:04):
The third rail of American politics was thought to be
the social security system and medicare. Some people say, ultimately
we were running out of money to fund the social
security system because people are living longer and so forth,
and we have more people retiring and then living longer.
Are you worried about the security of the subsecurity.
Speaker 1 (24:24):
System, David, One of the big titles I had in
government was managing Trustee of the Social Security Trust Fund.
And when I got there, I thought I actually could
do a lot of good. And one of the things
I was actually very focused on. Social Security still has
paper cards, and I thought one of the most ridiculous
(24:45):
thing is the Social Security number is the identifier most
people use. I wanted to focus on creating electronic ID
and I think that's still something we should do now.
As it relates to the Trust Fund, we did sure
report every year. The Trust Fund is going to run
out of money, and I think it's something that Congress
has to deal with. I hope that in the second
(25:07):
half of the president's term he can focus on social
security reform because it's a problem. The fund is going
to run out of money and there's lots of people
who alive upon it, so it needs to be fixed.
Speaker 2 (25:20):
In the second half of this term, he might have
a different House of Representatives. Historically, the first midterm election
a president usually loses about twenty five seats in the House.
There's no evidence in what will happen now, but if
President Trump were to lose control of the House, do
you think that would affect his agenda great deal in
(25:40):
terms of sociecurity reform other things, And therefore he needs
to get everything done in the first two years that
he really wants to get done well.
Speaker 1 (25:46):
First of all, as you know, the House with a
very small majority in the House, So yes, I do
think for the first two years, he has to focus
on what are the most important legislative agendas. Obviously, border
security something he's very focused on. I know there's been
this talk of one bill or two bills. Personally, I
would do two bills. I think he can have a
(26:07):
very quick win on border security and get that done
through the reconciliation. Tax reform is more complicated, so I
think that's going to take a good part of the year.
He could get the debt ceiling into the first bill.
He can then get all his taxes done in the
second bill. I think on something like social Security, you're
going to need bipartisan support.
Speaker 3 (26:29):
You're not going to want to attack that.
Speaker 1 (26:31):
Now that's something so it doesn't matter who controls Congress
for that.
Speaker 2 (26:36):
You know, a bus mark. I think it used to
said that there's two things you don't want to see
being made are sausage and legislation. And what is it
like when you're doing tax bills. You're sitting in a
smoke filled room and you're sitting there with the members
of Congress and they say I'll give you this and
you give me this, And how.
Speaker 3 (26:55):
Does that really work? Is a trade offs er?
Speaker 2 (26:57):
Everybody says, we just have to do what's best for
the American peer people, and we're not going to do
any trade offs or deals.
Speaker 1 (27:03):
Well, first of all, there are no smoke filled rooms.
That may have happened in the past, but at least
when I was there, nobody was smoking. No, I think
that you know it said, you know, we worked very
closely with the House and Senate. These are huge complicated issues.
Of course there have to be trade offs. You have
to think of how they were paid for us. I
mean when we did this the first time, it was
a trillion and a half dollars static, trillion dollars dynamic,
(27:28):
and we had about five hundred billion in what we
considered to be baseline issues. So of course there have
to be trade offs. And then I would just comment
on even once the tax reform was passed, we spent
the next year writing tax regulations and Treasury which is
a very important function to institute the law.
Speaker 2 (27:46):
So if you were king for today and you can
make any change in the way the economy, the finance
structured the United States is based, the spending is done.
What would be the one thing that you think we
should do to make our economy better or make our
financial system better than it is today.
Speaker 3 (28:01):
One thing, I would reform.
Speaker 1 (28:04):
The spending process and the debt sealing process so that
there was a real process of the administration having a budget,
that budget going through Congress every year, and that kind
of the focus around spending.
Speaker 2 (28:20):
Okay, so for the time being, you're going to be
in the private sector, you're not going to be drafted
back in the government, and you're happy with the highest
calling of mankind that you're now pursuing private equity.
Speaker 1 (28:30):
Right the highest calling was serving the people in the environment.
I know you think this is the highest time, David.
I know you've been terrific in advising and helping presidents,
and I'm sure you'll also give President Trump a bunch
of advice.
Speaker 2 (28:45):
Well, I don't know if he needs my advice. Certainly
not on the Kenney Center, probably, but we'll see. Okay, Okay,
I think we're out of time. So we're out of time, right, Okay, see,
thank you very much, thank you,
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