March 20, 2025 • 22 mins
Former US Treasury Secretary Steven Mnuchin said he likes the idea of an across-the-board 10% duty, but markets need clarity and understanding. In an episode of "The David Rubenstein Show: Peer to Peer Conversations," Mnuchin explains that he anticipates lower rates next year and is predicting “about 4% 10-year Treasuries.” Mnuchin who worked under President Trump during his first term describes the debt ceiling as an important mechanism and hopes that the President focuses on Social Security reform in the second half of his term. This interview was recorded March 5 at Bloomberg Invest in New York.
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Speaker 1 (00:03):
Steve Manuchin service Treasury Secretary under Donald Trump's first term.
Today he's running a global private equity firm. I had
a chance recently to sit down with Steve Manuchen to
talk about his days as Treasury secretary, the investment environment,
and the global economy. So you served as the seventy
seventh Secretary of the Treasury when President Trump was reelected.
(00:23):
Did you say maybe I want to go back in
again or you.
Speaker 2 (00:25):
Had enough government service?
Speaker 3 (00:27):
Well, it was an extraordinary experience working for him and
being part of the whole first campaign. And now I'm
really focused on private investments and opportunities. But I am
trying to help from the outside.
Speaker 2 (00:40):
So you're not going to go back in anytime soon.
Speaker 3 (00:44):
I'm happy doing what I'm doing and giving a little
coaching from the outside.
Speaker 1 (00:48):
You know, you served for four years, and President Trump,
to my knowledge, never criticized you in public.
Speaker 2 (00:56):
I don't know about private, but.
Speaker 1 (00:57):
You know, so to be four years and never be
criticized in public, that was pretty impressive.
Speaker 2 (01:02):
So what's the secret. Have you told the new Secretary
of Treasure what to do?
Speaker 3 (01:05):
I haven't told him what to do. I think he's
in very good shape. Look I understood the President's agenda.
I had the opportunity to help shape the economic agenda,
and we were proud of what we did.
Speaker 4 (01:17):
The first term.
Speaker 3 (01:18):
We were focused on tax cuts, getting the biggest tax
cuts done, trade and regulatory relief, and I'm excited to
see them focused on it again.
Speaker 1 (01:26):
So how do you think the tariffs are going to
affect the economy? Why does President Trump like tariffs so much?
Speaker 3 (01:34):
The President's been very focused on tariffs for a long time,
and he fundamentally believes it's a good source of revenue
and that it's impactful in getting people to change behavior,
and that's what we're seeing today.
Speaker 1 (01:48):
You think that tariffs will be ultimately good for the
US economy.
Speaker 2 (01:52):
I assume you have a similar view.
Speaker 3 (01:54):
Well, I think the market really wants certainty and understanding
certainty adjust to whatever they are. I think the problem
right now is we don't have certainty. My own view
on the tariffs would be that if he wants to
do something, I like the idea of the ten percent
tariff across the board, it's a consumption tax on foreign goods.
(02:17):
But if you were to do that, he should do
that through the reconciliation process. So that can be scored,
I think would raise about two and a half trillion
dollars and could be used to pay for tax cuts.
Speaker 1 (02:27):
As an example, speaking of tax cuts, you engineered with
President Trump the very large tax cut of his first term.
Do you think a similar size tax cut is essential now?
Speaker 3 (02:39):
Well, the biggest focus for them is just extending the
personal side of the tax cuts which are going to expire,
and I think 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 challenge with the pay force.
Speaker 1 (03:01):
Or during the campaign, he talked about a couple other
tax cuts. One is no tax on tips. Are people
getting tips actually paying a lot of taxes?
Speaker 2 (03:09):
I don't know.
Speaker 3 (03:10):
You know, we're not in as much as a cash
society as we used to, 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 4 (03:23):
I think that makes sense.
Speaker 3 (03:24):
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 tax that would be a little
bit more problematic. 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 1 (03:41):
When you were working on the tax cut, when you
were Secretary of Treategy, how did you find the intellectual
level of the ways and means committee members?
Speaker 3 (03:49):
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.
Speaker 4 (04:07):
Down and went through details.
Speaker 3 (04:08):
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 Bessett needs
to be very focused on working with the House and
the Senate to get this across the finish line.
Speaker 1 (04:24):
In recent decades, the annual deficit has been fairly high.
I think under President Trump's first four years, I think
it was maybe six to eight trillion dollars of additional
debt added to the total debt.
Speaker 2 (04:37):
We have that thirty six trillion.
Speaker 1 (04:38):
Now, how are we going to get the debt down
and the deficit down if we have these big tax cuts.
Speaker 3 (04:45):
Well, David, let me just say I think the deficit
is probably the most important issue today in terms of
the long term.
Speaker 4 (04:52):
Impact on the economy.
Speaker 3 (04:53):
And just to put this in perspective, in the first term,
we had debt to GDP ratio of about an hundred percent,
and with the tax cuts and economic growth before COVID,
we were growing the economy faster than we were growing
the debt, so that 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
(05:15):
first term was military spending. We unfortunately had to increase
non military spending to get it through the House and Senate.
But what really impacted us was COVID, and I think
as 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,
(05:37):
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
and twenty five percent today. That's a gigantic problem. Secretary
Besant has talked about getting the deficit down from six
percent to three percent of GDP and that's got to
(05:59):
be a major folks. 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 1 (06:07):
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
(06:28):
they say we want a strong dollar? Can you say
maybe it should weaken a little bit and to make
it our exports easier to sell.
Speaker 3 (06:34):
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.
Speaker 2 (06:51):
You know.
Speaker 3 (06:52):
Actually, when I was at Davos, I come into it
on a balanced, stable dollar as opposed to saying a
strong dollar, and all of a sudden, the dollar moved significantly.
I think on the long term it is important that
we have a strong dollar. The dollar is the reserve
currency of the world, and a strong dollar affects a
(07:12):
strong economy. In the short term, particularly because of trade,
you know, the strength of the dollar can have a
negative impact. But I think the most important thing is
actually a stable dollar so that there's not volatility.
Speaker 1 (07:27):
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 2 (07:43):
Do you have any comment on whether that's a good
or bad thing.
Speaker 3 (07:46):
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.
Speaker 4 (07:56):
Buy gold, that's fine to me.
Speaker 3 (07:58):
The bigger issue has been making sure that crypto is
not used 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 1 (08:20):
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. But for some reason, the 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
(08:40):
on whether cutting back the IRS agents that were put
in under a President Biden is a good thing to
do or not.
Speaker 3 (08:46):
I actually don't think we need more agents. What we
need is a bigger investment in technology. In the IRS,
the systems are outdated, and I think in this day
and age, there's a lot we can do with technoloology
that we don't need physical agents auditing people.
Speaker 4 (09:04):
It can be done electronically.
Speaker 1 (09:06):
So when you became the Secretary of the Treasury. There
was somebody on the Federal Reserve Board who had been
appointed by President Obama, James J.
Speaker 2 (09:13):
Powell, who used to.
Speaker 1 (09:14):
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 any regrets about recommending J.
Speaker 2 (09:25):
Powe.
Speaker 4 (09:25):
I do think Jay's done a very good job.
Speaker 3 (09:28):
You know, 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 rades down to zero at the time.
Speaker 1 (09:37):
So generally the President of the United States is not
supposed to talk to or lobby the Chairman of the Fed,
but the Secretary of Treasury usually meets regularly with the
Chairman of the Fed.
Speaker 2 (09:46):
Did you meet with him fairly regularly? I did.
Speaker 3 (09:49):
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.
(10:11):
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 1 (10:21):
So today, if you were Jpowe, would you lower interest
rates in the next six months or so?
Speaker 3 (10:27):
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 you know 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
(10:48):
a half than three. 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
and a quarter three and a half percent and funds
and I think we'll see about four percent ten year treasuries.
Speaker 1 (11:04):
You left Secretary 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 a bit
before you became Secretary of Treasury. But how do you
enjoy the private equity world?
Speaker 3 (11:18):
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 been CEO
(11:38):
of a bank, so that, you know, I understood a
lot of these issues. 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 you.
Speaker 1 (11:52):
Agree with my view that the highest calling of mankind
is private equity.
Speaker 2 (11:56):
I do not. No, you don't think so there's something
more important, but I don't know what it is. But okay, I.
Speaker 3 (12:00):
Would have thought you were going to tell me the
highest calling was to own a baseball team.
Speaker 2 (12:05):
If it's a winning team.
Speaker 1 (12:06):
Yes, But so let me ask you, Well, one of
the pleasures of being Secretary of the Treasury is you
get your handwriting on the dollar bill.
Speaker 2 (12:15):
Something like that.
Speaker 1 (12:15):
Some secretary of Treasures had incomprehensible, indecipherable handwriting and you
couldn't figure out who actually was signing it. But what
was the pleasure like of getting a bills one hundred
dollar bills or dollar bills and having your signature on it?
Speaker 2 (12:31):
Was that fun or not?
Speaker 3 (12:32):
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.
So I simplified my signature a lot.
Speaker 4 (12:46):
I guess the question.
Speaker 3 (12:47):
Is, is you know, I wonder if President Trump wants
his signature on the money.
Speaker 1 (12:54):
One of the most important parts of the Treasury Code
IRS code is something called carried interest taxation.
Speaker 2 (13:02):
You're probably familiar with that.
Speaker 3 (13:03):
I've heard about it a few time times. I heard
about it during the first I know.
Speaker 1 (13:07):
President Trump has never been a big fan of that.
I think you know, and I think in this current
speeches he's made about he said he wanted to get
rid of current I carried interest taxation and whatever benefit
sports owners gets as well.
Speaker 2 (13:20):
I don't know exactly what they are.
Speaker 1 (13:21):
But so do you have a view on carried interest
now that you were in the private EQUI world.
Speaker 3 (13:26):
One of the issues, as you know, on carried interest,
is if you have two investors and we invested. You know,
if I invested fifty percent, you invested fifty percent, we'd
need to pay a.
Speaker 4 (13:36):
Certain amount to tax to the extent in it.
Speaker 3 (13:39):
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. From a revenue standpoint, that'll have to
be something that Congress looks at.
Speaker 1 (14:00):
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 of treasurer or being a partner
at Goldman Sachs or not as much?
Speaker 3 (14:11):
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 Community Bank at
(14:34):
the time, and you know, banking is something that's been
very interesting to me.
Speaker 4 (14:37):
So this is the second time I did this.
Speaker 1 (14:39):
Now, 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
the trade deficit.
Speaker 3 (14:54):
Well, as you said, we have what's called the twin deficits.
In my opinion, the budget deficited two trillion dollars annually
is a.
Speaker 4 (15:02):
Much bigger problem.
Speaker 3 (15:04):
And I think, by the way, if you brought 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 open for foreign trade and foreign markets have
(15:26):
not been opened in the same way.
Speaker 4 (15:27):
You know, we spent a.
Speaker 3 (15:28):
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.
Speaker 4 (15:39):
That's an enormous opportunity for US business.
Speaker 3 (15:41):
And I do think kind of a big part of
the trade deficit is we don't have fair trade in
both directions.
Speaker 1 (15:48):
Now, President Trump has made a big push on getting
American companies and foreign companies to invest in the United
States manufacturer things that would probably be somewhat inflationary because
by definition, if you have people produce things overseas, probably
because it's the lowest cost producer, if you bring them
back the United States with higher labor costs, it'll be
a higher cost production, therefore maybe more inflationary. Despite that,
(16:10):
you think it's a good idea to have more things
manufacturing United States.
Speaker 3 (16:14):
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 do think that's a focus now. 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 1 (16:34):
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. Do you think that's
a real risk that the government could shut down again.
Speaker 3 (16:47):
Look, I'd say, you know, there's two issues that again
that I spent a lot of time on, both the
debt ceiling and government funding. So as Treasury, we could
have the money and not be able to spend it
right because of government funding, or we could have the
government funding but not have enough money because of the
(17:08):
dead ceiling.
Speaker 4 (17:09):
My major focus was the dead.
Speaker 3 (17:11):
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 bill quickly and raise
the dead ceiling.
Speaker 1 (17:22):
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 dead ceiling.
Speaker 3 (17:42):
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 passed is whatever the spending is, they should simultaneously
(18:03):
pass the debt 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 2 (18:21):
Now.
Speaker 1 (18:21):
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.
Speaker 2 (18:32):
A sovereign wealth fund.
Speaker 1 (18:32):
President Trump has signed an executive order I think, creating
a sovereign wealth fund. Where would the money come from
for that sovereign wealth fund?
Speaker 3 (18:40):
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.
Speaker 4 (18:48):
Obviously, oil and energy.
Speaker 3 (18:50):
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 4 (19:00):
The US is not in that situation.
Speaker 3 (19:02):
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 1 (19:23):
The third rail of American politics is 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 system.
Speaker 3 (19:44):
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 securities. Still has paper cards,
and I thought, one of the most ridiculous thing is
the social Security number is the identifier most people use.
(20:08):
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 half of the president's
term he can focus on Social Security reform because it's
(20:32):
a problem. The fund is going to run out of
money and there's lots of people who rely upon it,
so it needs to be fixed.
Speaker 1 (20:38):
Bismark. I think it used to said that the 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 does that really work?
Speaker 3 (20:57):
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, and we had about five
hundred billion in what we considered to be baseline issues.
(21:17):
So of course there have to be trade offs, and
then I would just comment on even once 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 1 (21:30):
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 (21:46):
One thing I would reform 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 1 (22:04):
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 3 (22:15):
Right, the highest calling was serving the people in the environment.
Speaker 4 (22:21):
I know you think this is the highest.
Speaker 1 (22:23):
Thanks for listening to hear more of my interviews. You
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wherever you listen
Steve Manuchin service Treasury Secretary under Donald Trump's first term.
Today he's running a global private equity firm. I had
a chance recently to sit down with Steve Manuchen to
talk about his days as Treasury secretary, the investment environment,
and the global economy. So you served as the seventy
seventh Secretary of the Treasury when President Trump was reelected.
(00:23):
Did you say maybe I want to go back in
again or you.
Speaker 2 (00:25):
Had enough government service?
Speaker 3 (00:27):
Well, it was an extraordinary experience working for him and
being part of the whole first campaign. And now I'm
really focused on private investments and opportunities. But I am
trying to help from the outside.
Speaker 2 (00:40):
So you're not going to go back in anytime soon.
Speaker 3 (00:44):
I'm happy doing what I'm doing and giving a little
coaching from the outside.
Speaker 1 (00:48):
You know, you served for four years, and President Trump,
to my knowledge, never criticized you in public.
Speaker 2 (00:56):
I don't know about private, but.
Speaker 1 (00:57):
You know, so to be four years and never be
criticized in public, that was pretty impressive.
Speaker 2 (01:02):
So what's the secret. Have you told the new Secretary
of Treasure what to do?
Speaker 3 (01:05):
I haven't told him what to do. I think he's
in very good shape. Look I understood the President's agenda.
I had the opportunity to help shape the economic agenda,
and we were proud of what we did.
Speaker 4 (01:17):
The first term.
Speaker 3 (01:18):
We were focused on tax cuts, getting the biggest tax
cuts done, trade and regulatory relief, and I'm excited to
see them focused on it again.
Speaker 1 (01:26):
So how do you think the tariffs are going to
affect the economy? Why does President Trump like tariffs so much?
Speaker 3 (01:34):
The President's been very focused on tariffs for a long time,
and he fundamentally believes it's a good source of revenue
and that it's impactful in getting people to change behavior,
and that's what we're seeing today.
Speaker 1 (01:48):
You think that tariffs will be ultimately good for the
US economy.
Speaker 2 (01:52):
I assume you have a similar view.
Speaker 3 (01:54):
Well, I think the market really wants certainty and understanding
certainty adjust to whatever they are. I think the problem
right now is we don't have certainty. My own view
on the tariffs would be that if he wants to
do something, I like the idea of the ten percent
tariff across the board, it's a consumption tax on foreign goods.
(02:17):
But if you were to do that, he should do
that through the reconciliation process. So that can be scored,
I think would raise about two and a half trillion
dollars and could be used to pay for tax cuts.
Speaker 1 (02:27):
As an example, speaking of tax cuts, you engineered with
President Trump the very large tax cut of his first term.
Do you think a similar size tax cut is essential now?
Speaker 3 (02:39):
Well, the biggest focus for them is just extending the
personal side of the tax cuts which are going to expire,
and I think 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 challenge with the pay force.
Speaker 1 (03:01):
Or during the campaign, he talked about a couple other
tax cuts. One is no tax on tips. Are people
getting tips actually paying a lot of taxes?
Speaker 2 (03:09):
I don't know.
Speaker 3 (03:10):
You know, we're not in as much as a cash
society as we used to, 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 4 (03:23):
I think that makes sense.
Speaker 3 (03:24):
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 tax that would be a little
bit more problematic. 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 1 (03:41):
When you were working on the tax cut, when you
were Secretary of Treategy, how did you find the intellectual
level of the ways and means committee members?
Speaker 3 (03:49):
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.
Speaker 4 (04:07):
Down and went through details.
Speaker 3 (04:08):
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 Bessett needs
to be very focused on working with the House and
the Senate to get this across the finish line.
Speaker 1 (04:24):
In recent decades, the annual deficit has been fairly high.
I think under President Trump's first four years, I think
it was maybe six to eight trillion dollars of additional
debt added to the total debt.
Speaker 2 (04:37):
We have that thirty six trillion.
Speaker 1 (04:38):
Now, how are we going to get the debt down
and the deficit down if we have these big tax cuts.
Speaker 3 (04:45):
Well, David, let me just say I think the deficit
is probably the most important issue today in terms of
the long term.
Speaker 4 (04:52):
Impact on the economy.
Speaker 3 (04:53):
And just to put this in perspective, in the first term,
we had debt to GDP ratio of about an hundred percent,
and with the tax cuts and economic growth before COVID,
we were growing the economy faster than we were growing
the debt, so that 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
(05:15):
first term was military spending. We unfortunately had to increase
non military spending to get it through the House and Senate.
But what really impacted us was COVID, and I think
as 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,
(05:37):
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
and twenty five percent today. That's a gigantic problem. Secretary
Besant has talked about getting the deficit down from six
percent to three percent of GDP and that's got to
(05:59):
be a major folks. 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 1 (06:07):
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
(06:28):
they say we want a strong dollar? Can you say
maybe it should weaken a little bit and to make
it our exports easier to sell.
Speaker 3 (06:34):
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.
Speaker 2 (06:51):
You know.
Speaker 3 (06:52):
Actually, when I was at Davos, I come into it
on a balanced, stable dollar as opposed to saying a
strong dollar, and all of a sudden, the dollar moved significantly.
I think on the long term it is important that
we have a strong dollar. The dollar is the reserve
currency of the world, and a strong dollar affects a
(07:12):
strong economy. In the short term, particularly because of trade,
you know, the strength of the dollar can have a
negative impact. But I think the most important thing is
actually a stable dollar so that there's not volatility.
Speaker 1 (07:27):
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 2 (07:43):
Do you have any comment on whether that's a good
or bad thing.
Speaker 3 (07:46):
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.
Speaker 4 (07:56):
Buy gold, that's fine to me.
Speaker 3 (07:58):
The bigger issue has been making sure that crypto is
not used 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 1 (08:20):
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. But for some reason, the 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
(08:40):
on whether cutting back the IRS agents that were put
in under a President Biden is a good thing to
do or not.
Speaker 3 (08:46):
I actually don't think we need more agents. What we
need is a bigger investment in technology. In the IRS,
the systems are outdated, and I think in this day
and age, there's a lot we can do with technoloology
that we don't need physical agents auditing people.
Speaker 4 (09:04):
It can be done electronically.
Speaker 1 (09:06):
So when you became the Secretary of the Treasury. There
was somebody on the Federal Reserve Board who had been
appointed by President Obama, James J.
Speaker 2 (09:13):
Powell, who used to.
Speaker 1 (09:14):
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 any regrets about recommending J.
Speaker 2 (09:25):
Powe.
Speaker 4 (09:25):
I do think Jay's done a very good job.
Speaker 3 (09:28):
You know, 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 rades down to zero at the time.
Speaker 1 (09:37):
So generally the President of the United States is not
supposed to talk to or lobby the Chairman of the Fed,
but the Secretary of Treasury usually meets regularly with the
Chairman of the Fed.
Speaker 2 (09:46):
Did you meet with him fairly regularly? I did.
Speaker 3 (09:49):
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.
(10:11):
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 1 (10:21):
So today, if you were Jpowe, would you lower interest
rates in the next six months or so?
Speaker 3 (10:27):
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 you know 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
(10:48):
a half than three. 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
and a quarter three and a half percent and funds
and I think we'll see about four percent ten year treasuries.
Speaker 1 (11:04):
You left Secretary 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 a bit
before you became Secretary of Treasury. But how do you
enjoy the private equity world?
Speaker 3 (11:18):
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 been CEO
(11:38):
of a bank, so that, you know, I understood a
lot of these issues. 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 you.
Speaker 1 (11:52):
Agree with my view that the highest calling of mankind
is private equity.
Speaker 2 (11:56):
I do not. No, you don't think so there's something
more important, but I don't know what it is. But okay, I.
Speaker 3 (12:00):
Would have thought you were going to tell me the
highest calling was to own a baseball team.
Speaker 2 (12:05):
If it's a winning team.
Speaker 1 (12:06):
Yes, But so let me ask you, Well, one of
the pleasures of being Secretary of the Treasury is you
get your handwriting on the dollar bill.
Speaker 2 (12:15):
Something like that.
Speaker 1 (12:15):
Some secretary of Treasures had incomprehensible, indecipherable handwriting and you
couldn't figure out who actually was signing it. But what
was the pleasure like of getting a bills one hundred
dollar bills or dollar bills and having your signature on it?
Speaker 2 (12:31):
Was that fun or not?
Speaker 3 (12:32):
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.
So I simplified my signature a lot.
Speaker 4 (12:46):
I guess the question.
Speaker 3 (12:47):
Is, is you know, I wonder if President Trump wants
his signature on the money.
Speaker 1 (12:54):
One of the most important parts of the Treasury Code
IRS code is something called carried interest taxation.
Speaker 2 (13:02):
You're probably familiar with that.
Speaker 3 (13:03):
I've heard about it a few time times. I heard
about it during the first I know.
Speaker 1 (13:07):
President Trump has never been a big fan of that.
I think you know, and I think in this current
speeches he's made about he said he wanted to get
rid of current I carried interest taxation and whatever benefit
sports owners gets as well.
Speaker 2 (13:20):
I don't know exactly what they are.
Speaker 1 (13:21):
But so do you have a view on carried interest
now that you were in the private EQUI world.
Speaker 3 (13:26):
One of the issues, as you know, on carried interest,
is if you have two investors and we invested. You know,
if I invested fifty percent, you invested fifty percent, we'd
need to pay a.
Speaker 4 (13:36):
Certain amount to tax to the extent in it.
Speaker 3 (13:39):
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. From a revenue standpoint, that'll have to
be something that Congress looks at.
Speaker 1 (14:00):
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 of treasurer or being a partner
at Goldman Sachs or not as much?
Speaker 3 (14:11):
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 Community Bank at
(14:34):
the time, and you know, banking is something that's been
very interesting to me.
Speaker 4 (14:37):
So this is the second time I did this.
Speaker 1 (14:39):
Now, 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
the trade deficit.
Speaker 3 (14:54):
Well, as you said, we have what's called the twin deficits.
In my opinion, the budget deficited two trillion dollars annually
is a.
Speaker 4 (15:02):
Much bigger problem.
Speaker 3 (15:04):
And I think, by the way, if you brought 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 open for foreign trade and foreign markets have
(15:26):
not been opened in the same way.
Speaker 4 (15:27):
You know, we spent a.
Speaker 3 (15:28):
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.
Speaker 4 (15:39):
That's an enormous opportunity for US business.
Speaker 3 (15:41):
And I do think kind of a big part of
the trade deficit is we don't have fair trade in
both directions.
Speaker 1 (15:48):
Now, President Trump has made a big push on getting
American companies and foreign companies to invest in the United
States manufacturer things that would probably be somewhat inflationary because
by definition, if you have people produce things overseas, probably
because it's the lowest cost producer, if you bring them
back the United States with higher labor costs, it'll be
a higher cost production, therefore maybe more inflationary. Despite that,
(16:10):
you think it's a good idea to have more things
manufacturing United States.
Speaker 3 (16:14):
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 do think that's a focus now. 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 1 (16:34):
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. Do you think that's
a real risk that the government could shut down again.
Speaker 3 (16:47):
Look, I'd say, you know, there's two issues that again
that I spent a lot of time on, both the
debt ceiling and government funding. So as Treasury, we could
have the money and not be able to spend it
right because of government funding, or we could have the
government funding but not have enough money because of the
(17:08):
dead ceiling.
Speaker 4 (17:09):
My major focus was the dead.
Speaker 3 (17:11):
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 bill quickly and raise
the dead ceiling.
Speaker 1 (17:22):
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 dead ceiling.
Speaker 3 (17:42):
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 passed is whatever the spending is, they should simultaneously
(18:03):
pass the debt 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 2 (18:21):
Now.
Speaker 1 (18:21):
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.
Speaker 2 (18:32):
A sovereign wealth fund.
Speaker 1 (18:32):
President Trump has signed an executive order I think, creating
a sovereign wealth fund. Where would the money come from
for that sovereign wealth fund?
Speaker 3 (18:40):
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.
Speaker 4 (18:48):
Obviously, oil and energy.
Speaker 3 (18:50):
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 4 (19:00):
The US is not in that situation.
Speaker 3 (19:02):
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 1 (19:23):
The third rail of American politics is 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 system.
Speaker 3 (19:44):
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 securities. Still has paper cards,
and I thought, one of the most ridiculous thing is
the social Security number is the identifier most people use.
(20:08):
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 half of the president's
term he can focus on Social Security reform because it's
(20:32):
a problem. The fund is going to run out of
money and there's lots of people who rely upon it,
so it needs to be fixed.
Speaker 1 (20:38):
Bismark. I think it used to said that the 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 does that really work?
Speaker 3 (20:57):
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, and we had about five
hundred billion in what we considered to be baseline issues.
(21:17):
So of course there have to be trade offs, and
then I would just comment on even once 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 1 (21:30):
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 (21:46):
One thing I would reform 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 1 (22:04):
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 3 (22:15):
Right, the highest calling was serving the people in the environment.
Speaker 4 (22:21):
I know you think this is the highest.
Speaker 1 (22:23):
Thanks for listening to hear more of my interviews. You
can subscribe and download my podcast on Spotify, Apple, or
wherever you listen
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