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Transcript

Steven Mnuchin · The David Rubenstein Show

• 0:03
  Speaker 1: Steve Manuchin service Treasury Secretary under Donald Trump's first term.
• 0:07
  Speaker 1: Today he's running a global private equity firm. I had
• 0:10
  Speaker 1: a chance recently to sit down with Steve Manuchen to
• 0:12
  Speaker 1: talk about his days as Treasury secretary, the investment environment,
• 0:15
  Speaker 1: and the global economy. So you served as the seventy
• 0:19
  Speaker 1: seventh Secretary of the Treasury when President Trump was reelected.
• 0:23
  Speaker 1: Did you say maybe I want to go back in
• 0:25
  Speaker 1: again or you.
• 0:25
  Speaker 2: Had enough government service?
• 0:27
  Speaker 3: Well, it was an extraordinary experience working for him and
• 0:30
  Speaker 3: being part of the whole first campaign. And now I'm
• 0:33
  Speaker 3: really focused on private investments and opportunities. But I am
• 0:38
  Speaker 3: trying to help from the outside.
• 0:40
  Speaker 2: So you're not going to go back in anytime soon.
• 0:44
  Speaker 3: I'm happy doing what I'm doing and giving a little
• 0:46
  Speaker 3: coaching from the outside.
• 0:48
  Speaker 1: You know, you served for four years, and President Trump,
• 0:53
  Speaker 1: to my knowledge, never criticized you in public.
• 0:56
  Speaker 2: I don't know about private, but.
• 0:57
  Speaker 1: You know, so to be four years and never be
• 1:00
  Speaker 1: criticized in public, that was pretty impressive.
• 1:02
  Speaker 2: So what's the secret. Have you told the new Secretary
• 1:04
  Speaker 2: of Treasure what to do?
• 1:05
  Speaker 3: I haven't told him what to do. I think he's
• 1:07
  Speaker 3: in very good shape. Look I understood the President's agenda.
• 1:12
  Speaker 3: I had the opportunity to help shape the economic agenda,
• 1:15
  Speaker 3: and we were proud of what we did.
• 1:17
  Speaker 4: The first term.
• 1:18
  Speaker 3: We were focused on tax cuts, getting the biggest tax
• 1:21
  Speaker 3: cuts done, trade and regulatory relief, and I'm excited to
• 1:25
  Speaker 3: see them focused on it again.
• 1:26
  Speaker 1: So how do you think the tariffs are going to
• 1:29
  Speaker 1: affect the economy? Why does President Trump like tariffs so much?
• 1:34
  Speaker 3: The President's been very focused on tariffs for a long time,
• 1:38
  Speaker 3: and he fundamentally believes it's a good source of revenue
• 1:42
  Speaker 3: and that it's impactful in getting people to change behavior,
• 1:46
  Speaker 3: and that's what we're seeing today.
• 1:48
  Speaker 1: You think that tariffs will be ultimately good for the
• 1:51
  Speaker 1: US economy.
• 1:52
  Speaker 2: I assume you have a similar view.
• 1:54
  Speaker 3: Well, I think the market really wants certainty and understanding
• 1:59
  Speaker 3: certainty adjust to whatever they are. I think the problem
• 2:02
  Speaker 3: right now is we don't have certainty. My own view
• 2:06
  Speaker 3: on the tariffs would be that if he wants to
• 2:09
  Speaker 3: do something, I like the idea of the ten percent
• 2:12
  Speaker 3: tariff across the board, it's a consumption tax on foreign goods.
• 2:17
  Speaker 3: But if you were to do that, he should do
• 2:19
  Speaker 3: that through the reconciliation process. So that can be scored,
• 2:22
  Speaker 3: I think would raise about two and a half trillion
• 2:24
  Speaker 3: dollars and could be used to pay for tax cuts.
• 2:27
  Speaker 1: As an example, speaking of tax cuts, you engineered with
• 2:31
  Speaker 1: President Trump the very large tax cut of his first term.
• 2:35
  Speaker 1: Do you think a similar size tax cut is essential now?
• 2:39
  Speaker 3: Well, the biggest focus for them is just extending the
• 2:43
  Speaker 3: personal side of the tax cuts which are going to expire,
• 2:47
  Speaker 3: and I think that that was a signature part of
• 2:50
  Speaker 3: his first term, and I think that's got to be
• 2:52
  Speaker 3: the priority to continue now. On top of that, I
• 2:55
  Speaker 3: know he wants to do additional tax cuts and that'll
• 2:59
  Speaker 3: be a little bit more challenge with the pay force.
• 3:01
  Speaker 1: Or during the campaign, he talked about a couple other
• 3:04
  Speaker 1: tax cuts. One is no tax on tips. Are people
• 3:08
  Speaker 1: getting tips actually paying a lot of taxes?
• 3:09
  Speaker 2: I don't know.
• 3:10
  Speaker 3: You know, we're not in as much as a cash
• 3:12
  Speaker 3: society as we used to, so there's a lot of
• 3:14
  Speaker 3: tips that go through an electronic mechanism. I think if
• 3:19
  Speaker 3: he wants to have a small carve out for tax
• 3:22
  Speaker 3: on tips.
• 3:23
  Speaker 4: I think that makes sense.
• 3:24
  Speaker 3: I think obviously, if you start giving tips to investment
• 3:28
  Speaker 3: bankers at the end of the year instead of bonuses
• 3:30
  Speaker 3: and they don't get tax that would be a little
• 3:32
  Speaker 3: bit more problematic. And you know, you could tax your lawyers,
• 3:35
  Speaker 3: and so I think if he does that, it needs
• 3:39
  Speaker 3: to have a small carve out.
• 3:41
  Speaker 1: When you were working on the tax cut, when you
• 3:43
  Speaker 1: were Secretary of Treategy, how did you find the intellectual
• 3:46
  Speaker 1: level of the ways and means committee members?
• 3:49
  Speaker 3: You know, when we passed the tax cuts, and this
• 3:51
  Speaker 3: was a lot of work, we were very engaged with
• 3:54
  Speaker 3: both the House and Senate, and actually we had weekly
• 3:57
  Speaker 3: meetings which was called the Big Six. It was me
• 4:00
  Speaker 3: and Gary Cohne from the White House, it was the Senate,
• 4:03
  Speaker 3: and it was the House, and literally every week we sat.
• 4:07
  Speaker 4: Down and went through details.
• 4:08
  Speaker 3: So I mean, as you know, I mean, we had
• 4:11
  Speaker 3: sweeping tax reform across everything. This time it is actually
• 4:15
  Speaker 3: a lot simpler. But I do think Secretary Bessett needs
• 4:19
  Speaker 3: to be very focused on working with the House and
• 4:21
  Speaker 3: the Senate to get this across the finish line.
• 4:24
  Speaker 1: In recent decades, the annual deficit has been fairly high.
• 4:30
  Speaker 1: I think under President Trump's first four years, I think
• 4:33
  Speaker 1: it was maybe six to eight trillion dollars of additional
• 4:35
  Speaker 1: debt added to the total debt.
• 4:37
  Speaker 2: We have that thirty six trillion.
• 4:38
  Speaker 1: Now, how are we going to get the debt down
• 4:41
  Speaker 1: and the deficit down if we have these big tax cuts.
• 4:45
  Speaker 3: Well, David, let me just say I think the deficit
• 4:48
  Speaker 3: is probably the most important issue today in terms of
• 4:51
  Speaker 3: the long term.
• 4:52
  Speaker 4: Impact on the economy.
• 4:53
  Speaker 3: And just to put this in perspective, in the first term,
• 4:57
  Speaker 3: we had debt to GDP ratio of about an hundred percent,
• 5:01
  Speaker 3: and with the tax cuts and economic growth before COVID,
• 5:05
  Speaker 3: we were growing the economy faster than we were growing
• 5:07
  Speaker 3: the debt, so that that ratio would have come down,
• 5:10
  Speaker 3: and I think we were trying to get it down
• 5:12
  Speaker 3: to ninety to ninety five. The big focus on the
• 5:15
  Speaker 3: first term was military spending. We unfortunately had to increase
• 5:20
  Speaker 3: non military spending to get it through the House and Senate.
• 5:23
  Speaker 3: But what really impacted us was COVID, and I think
• 5:26
  Speaker 3: as you know firsthand, you know, we had to spend
• 5:30
  Speaker 3: a lot of money in COVID or we would have
• 5:32
  Speaker 3: had a worldwide depression, not recession. I think the problem was,
• 5:37
  Speaker 3: you know, the first two trillion dollars was well spent,
• 5:39
  Speaker 3: the next two trillion we never should have spent. And
• 5:42
  Speaker 3: then the Biden administration kept on spending. So you know,
• 5:46
  Speaker 3: we have debt to GDP of close to one hundred
• 5:48
  Speaker 3: and twenty five percent today. That's a gigantic problem. Secretary
• 5:53
  Speaker 3: Besant has talked about getting the deficit down from six
• 5:56
  Speaker 3: percent to three percent of GDP and that's got to
• 5:59
  Speaker 3: be a major folks. So if we're going to do
• 6:01
  Speaker 3: the tax cuts, we need to make sure there's pay
• 6:04
  Speaker 3: for us, and we need to make sure there's economic growth.
• 6:07
  Speaker 1: When Bob Rubin was Secretary of the Treasury, he once
• 6:10
  Speaker 1: talked about the value of the dollar, and he made
• 6:13
  Speaker 1: a mistake, he later would say, by talking about saying
• 6:17
  Speaker 1: something other than we want a strong dollar. And now
• 6:19
  Speaker 1: every Treasury secretary is told you can only say one
• 6:22
  Speaker 1: thing about the dollar. We want a strong dollar. But
• 6:25
  Speaker 1: what can former secretaries and Treasury say about that? Can
• 6:28
  Speaker 1: they say we want a strong dollar? Can you say
• 6:30
  Speaker 1: maybe it should weaken a little bit and to make
• 6:32
  Speaker 1: it our exports easier to sell.
• 6:34
  Speaker 3: Well, you know, it's funny that you say that, And
• 6:36
  Speaker 3: Bob really was kind of credited with the strong dollar policy,
• 6:40
  Speaker 3: and I think it's kind of every Treasury secretary after
• 6:43
  Speaker 3: that kind of you know, you got Treasury one oh
• 6:46
  Speaker 3: one training, and the first thing they told you was
• 6:48
  Speaker 3: just talk about a strong dollar.
• 6:51
  Speaker 2: You know.
• 6:52
  Speaker 3: Actually, when I was at Davos, I come into it
• 6:54
  Speaker 3: on a balanced, stable dollar as opposed to saying a
• 6:58
  Speaker 3: strong dollar, and all of a sudden, the dollar moved significantly.
• 7:03
  Speaker 3: I think on the long term it is important that
• 7:06
  Speaker 3: we have a strong dollar. The dollar is the reserve
• 7:08
  Speaker 3: currency of the world, and a strong dollar affects a
• 7:12
  Speaker 3: strong economy. In the short term, particularly because of trade,
• 7:16
  Speaker 3: you know, the strength of the dollar can have a
• 7:20
  Speaker 3: negative impact. But I think the most important thing is
• 7:24
  Speaker 3: actually a stable dollar so that there's not volatility.
• 7:27
  Speaker 1: Speaking of stable, what do you think about the Secretary
• 7:30
  Speaker 1: of Treasury or the US government supporting cryptocurrencies. They didn't
• 7:35
  Speaker 1: really have them so much when you were Secretary of Treasury,
• 7:37
  Speaker 1: but now cryptocurrencies seem to be very heavily supported by
• 7:41
  Speaker 1: President Trump and his administration.
• 7:43
  Speaker 2: Do you have any comment on whether that's a good
• 7:45
  Speaker 2: or bad thing.
• 7:46
  Speaker 3: Look, my view on crypto has been pretty consistent. We
• 7:48
  Speaker 3: did a lot of work on this in the first term.
• 7:51
  Speaker 3: If people want to buy crypto as an asset class
• 7:55
  Speaker 3: like they.
• 7:56
  Speaker 4: Buy gold, that's fine to me.
• 7:58
  Speaker 3: The bigger issue has been making sure that crypto is
• 8:02
  Speaker 3: not used for illicit activities. And you know, we spent
• 8:06
  Speaker 3: a long time getting rid of Swiss numbered bank accounts,
• 8:09
  Speaker 3: making sure that we have a mechanism that crypto can
• 8:13
  Speaker 3: be compliant with BSA and all of our money laundering regulations.
• 8:17
  Speaker 3: And I have concerns today about that.
• 8:20
  Speaker 1: You know, in the business world, investment world, if you
• 8:24
  Speaker 1: hire more fundraisers, you usually raise more money. In the
• 8:27
  Speaker 1: IRS world, if you get more agents, you usually raise
• 8:31
  Speaker 1: more money. But for some reason, the Republican Party seems
• 8:34
  Speaker 1: to want to have fewer agents, and therefore they reduce
• 8:36
  Speaker 1: the number of agents, and therefore maybe they're not going
• 8:39
  Speaker 1: to raise as much money. Do you have a view
• 8:40
  Speaker 1: on whether cutting back the IRS agents that were put
• 8:43
  Speaker 1: in under a President Biden is a good thing to
• 8:46
  Speaker 1: do or not.
• 8:46
  Speaker 3: I actually don't think we need more agents. What we
• 8:49
  Speaker 3: need is a bigger investment in technology. In the IRS,
• 8:54
  Speaker 3: the systems are outdated, and I think in this day
• 8:56
  Speaker 3: and age, there's a lot we can do with technoloology
• 9:00
  Speaker 3: that we don't need physical agents auditing people.
• 9:04
  Speaker 4: It can be done electronically.
• 9:06
  Speaker 1: So when you became the Secretary of the Treasury. There
• 9:08
  Speaker 1: was somebody on the Federal Reserve Board who had been
• 9:10
  Speaker 1: appointed by President Obama, James J.
• 9:13
  Speaker 2: Powell, who used to.
• 9:14
  Speaker 1: Work at my firm, and then you recommended him to
• 9:17
  Speaker 1: President Trump, I think, to be the chairman of the
• 9:19
  Speaker 1: Federal Reserve. President Trump was not happy with him at
• 9:22
  Speaker 1: the beginning. I guess any regrets about recommending J.
• 9:25
  Speaker 2: Powe.
• 9:25
  Speaker 4: I do think Jay's done a very good job.
• 9:28
  Speaker 3: You know, as President Trump he had a bunch of
• 9:30
  Speaker 3: issues with him raising rates, but then during COVID he
• 9:33
  Speaker 3: did give him the Most Improved Player Award when he
• 9:35
  Speaker 3: dropped rades down to zero at the time.
• 9:37
  Speaker 1: So generally the President of the United States is not
• 9:40
  Speaker 1: supposed to talk to or lobby the Chairman of the Fed,
• 9:43
  Speaker 1: but the Secretary of Treasury usually meets regularly with the
• 9:46
  Speaker 1: Chairman of the Fed.
• 9:46
  Speaker 2: Did you meet with him fairly regularly? I did.
• 9:49
  Speaker 3: I mean we inherited a tradition which has been kept
• 9:53
  Speaker 3: up is that the Secretary of the Treasury and the
• 9:56
  Speaker 3: Chairman of the Fed meet weekly. It alternates every week
• 10:00
  Speaker 3: between being at the Treasury and the FED. And I
• 10:03
  Speaker 3: found those meetings very helpful. I mean a big focus
• 10:06
  Speaker 3: was obviously what we were doing on regulation monetary policy.
• 10:11
  Speaker 3: I never talked about monetary policy publicly, but yes, of
• 10:15
  Speaker 3: course we did talk about those types of things. We
• 10:17
  Speaker 3: talked about the economy, and I think we had a
• 10:19
  Speaker 3: very good working relationship.
• 10:21
  Speaker 1: So today, if you were Jpowe, would you lower interest
• 10:24
  Speaker 1: rates in the next six months or so?
• 10:27
  Speaker 3: I think it's pretty clear the Fed is going to
• 10:29
  Speaker 3: lower rates. So I mean, if you look at the
• 10:31
  Speaker 3: dot plot, which is you know what the Fed governors
• 10:35
  Speaker 3: have publicly said, you do see rates coming down to
• 10:39
  Speaker 3: about three in a quarter, and you see the long
• 10:42
  Speaker 3: term rate at about two point eight. I do think
• 10:45
  Speaker 3: the long term rate between being closer to two and
• 10:48
  Speaker 3: a half than three. And I think we're going to
• 10:50
  Speaker 3: see rates lowered next year. And by the way, I
• 10:53
  Speaker 3: think the ten year has that already built in to
• 10:56
  Speaker 3: the market. So I think we're going to see three
• 10:58
  Speaker 3: and a quarter three and a half percent and funds
• 11:00
  Speaker 3: and I think we'll see about four percent ten year treasuries.
• 11:04
  Speaker 1: You left Secretary Treasury and you start a private equity firm,
• 11:07
  Speaker 1: Liberty Strategic Capital. So is private equity as fulfilling as
• 11:12
  Speaker 1: you thought? I know you were in it a bit
• 11:13
  Speaker 1: before you became Secretary of Treasury. But how do you
• 11:16
  Speaker 1: enjoy the private equity world?
• 11:18
  Speaker 3: Well, David, you know, I've been in the investment business
• 11:21
  Speaker 3: and the markets businesses now for forty years, and I
• 11:26
  Speaker 3: think kind of every job I did kind of prepared
• 11:29
  Speaker 3: me more for the future. And when I became Treasury
• 11:32
  Speaker 3: as secretary, I think it was helpful that I had
• 11:35
  Speaker 3: a background in markets and risk. I had been CEO
• 11:38
  Speaker 3: of a bank, so that, you know, I understood a
• 11:41
  Speaker 3: lot of these issues. You know, we're small enough that
• 11:44
  Speaker 3: we focus on a handful of investments. We've done about
• 11:48
  Speaker 3: ten investments to date, and you know, I find it
• 11:51
  Speaker 3: very interesting you.
• 11:52
  Speaker 1: Agree with my view that the highest calling of mankind
• 11:55
  Speaker 1: is private equity.
• 11:56
  Speaker 2: I do not. No, you don't think so there's something
• 11:58
  Speaker 2: more important, but I don't know what it is. But okay, I.
• 12:00
  Speaker 3: Would have thought you were going to tell me the
• 12:02
  Speaker 3: highest calling was to own a baseball team.
• 12:05
  Speaker 2: If it's a winning team.
• 12:06
  Speaker 1: Yes, But so let me ask you, Well, one of
• 12:09
  Speaker 1: the pleasures of being Secretary of the Treasury is you
• 12:11
  Speaker 1: get your handwriting on the dollar bill.
• 12:15
  Speaker 2: Something like that.
• 12:15
  Speaker 1: Some secretary of Treasures had incomprehensible, indecipherable handwriting and you
• 12:21
  Speaker 1: couldn't figure out who actually was signing it. But what
• 12:24
  Speaker 1: was the pleasure like of getting a bills one hundred
• 12:27
  Speaker 1: dollar bills or dollar bills and having your signature on it?
• 12:31
  Speaker 2: Was that fun or not?
• 12:32
  Speaker 3: You know, David, I changed my signature because my signature
• 12:35
  Speaker 3: was completely illegible, okay, And I thought, if I'm going
• 12:39
  Speaker 3: to have my signature on the money forever, it would
• 12:42
  Speaker 3: be nice if you could see it and read it.
• 12:44
  Speaker 3: So I simplified my signature a lot.
• 12:46
  Speaker 4: I guess the question.
• 12:47
  Speaker 3: Is, is you know, I wonder if President Trump wants
• 12:51
  Speaker 3: his signature on the money.
• 12:54
  Speaker 1: One of the most important parts of the Treasury Code
• 12:59
  Speaker 1: IRS code is something called carried interest taxation.
• 13:02
  Speaker 2: You're probably familiar with that.
• 13:03
  Speaker 3: I've heard about it a few time times. I heard
• 13:05
  Speaker 3: about it during the first I know.
• 13:07
  Speaker 1: President Trump has never been a big fan of that.
• 13:09
  Speaker 1: I think you know, and I think in this current
• 13:13
  Speaker 1: speeches he's made about he said he wanted to get
• 13:15
  Speaker 1: rid of current I carried interest taxation and whatever benefit
• 13:19
  Speaker 1: sports owners gets as well.
• 13:20
  Speaker 2: I don't know exactly what they are.
• 13:21
  Speaker 1: But so do you have a view on carried interest
• 13:24
  Speaker 1: now that you were in the private EQUI world.
• 13:26
  Speaker 3: One of the issues, as you know, on carried interest,
• 13:28
  Speaker 3: is if you have two investors and we invested. You know,
• 13:32
  Speaker 3: if I invested fifty percent, you invested fifty percent, we'd
• 13:35
  Speaker 3: need to pay a.
• 13:36
  Speaker 4: Certain amount to tax to the extent in it.
• 13:39
  Speaker 3: You create a fund and we decide as opposed to
• 13:43
  Speaker 3: it being fifty to fifty, we're going to exchange profits.
• 13:46
  Speaker 3: It doesn't change the tax that the government collects. So
• 13:50
  Speaker 3: I think from an academic standpoint, you know there's a
• 13:54
  Speaker 3: reason behind this. From a revenue standpoint, that'll have to
• 13:57
  Speaker 3: be something that Congress looks at.
• 14:00
  Speaker 1: What is the biggest pleasure you've gotten out of having
• 14:02
  Speaker 1: a private equity fund? Now you raised the fund, You've
• 14:04
  Speaker 1: made a number of investments. Are you enjoying us as
• 14:07
  Speaker 1: much as being Secretary of treasurer or being a partner
• 14:09
  Speaker 1: at Goldman Sachs or not as much?
• 14:11
  Speaker 3: I mean, David, all these experiences were really extraordinary. I mean,
• 14:15
  Speaker 3: what I find interesting about this is investing in businesses
• 14:20
  Speaker 3: and being able to impact certain businesses. You know, I've
• 14:23
  Speaker 3: had a long experience in banking. We made a big
• 14:27
  Speaker 3: investment that we bailed out and saved what was a
• 14:31
  Speaker 3: Flagstar bank, it was called New York Community Bank at
• 14:34
  Speaker 3: the time, and you know, banking is something that's been
• 14:36
  Speaker 3: very interesting to me.
• 14:37
  Speaker 4: So this is the second time I did this.
• 14:39
  Speaker 1: Now, President Trump and his administration are very focused on
• 14:42
  Speaker 1: the trade deficit, which is very, very high these days.
• 14:45
  Speaker 1: But is the trade deficit that big a problem compared
• 14:48
  Speaker 1: to the budget deficit? If you were to worry about
• 14:50
  Speaker 1: which deficit, wouldn't be budget deficit be more important than
• 14:53
  Speaker 1: the trade deficit.
• 14:54
  Speaker 3: Well, as you said, we have what's called the twin deficits.
• 14:58
  Speaker 3: In my opinion, the budget deficited two trillion dollars annually
• 15:02
  Speaker 3: is a.
• 15:02
  Speaker 4: Much bigger problem.
• 15:04
  Speaker 3: And I think, by the way, if you brought down
• 15:06
  Speaker 3: the budget deficit, by definition, you'd bring down the trade
• 15:10
  Speaker 3: deficit because you'd have less demand for goods in general.
• 15:15
  Speaker 3: And I do think the idea of resetting trade relationships.
• 15:18
  Speaker 3: I mean, President Trump is right that the US market
• 15:22
  Speaker 3: has been open for foreign trade and foreign markets have
• 15:26
  Speaker 3: not been opened in the same way.
• 15:27
  Speaker 4: You know, we spent a.
• 15:28
  Speaker 3: Lot of time with China on the Phase one deal.
• 15:31
  Speaker 3: They haven't lived up to that. But the whole idea
• 15:34
  Speaker 3: was if we could allow access to our business to
• 15:37
  Speaker 3: a growing China middle class.
• 15:39
  Speaker 4: That's an enormous opportunity for US business.
• 15:41
  Speaker 3: And I do think kind of a big part of
• 15:43
  Speaker 3: the trade deficit is we don't have fair trade in
• 15:46
  Speaker 3: both directions.
• 15:48
  Speaker 1: Now, President Trump has made a big push on getting
• 15:50
  Speaker 1: American companies and foreign companies to invest in the United
• 15:53
  Speaker 1: States manufacturer things that would probably be somewhat inflationary because
• 15:58
  Speaker 1: by definition, if you have people produce things overseas, probably
• 16:01
  Speaker 1: because it's the lowest cost producer, if you bring them
• 16:04
  Speaker 1: back the United States with higher labor costs, it'll be
• 16:06
  Speaker 1: a higher cost production, therefore maybe more inflationary. Despite that,
• 16:10
  Speaker 1: you think it's a good idea to have more things
• 16:12
  Speaker 1: manufacturing United States.
• 16:14
  Speaker 3: Well, I definitely think US manufacturing jobs has always been
• 16:18
  Speaker 3: a big focus of his. I think, you know, there
• 16:20
  Speaker 3: was a large part of the economy that was left behind,
• 16:23
  Speaker 3: and I do think that's a focus now. Obviously, there
• 16:26
  Speaker 3: are different markets that can be competitive, so I think
• 16:29
  Speaker 3: we can have the same thing, but his focus should
• 16:32
  Speaker 3: be US investment.
• 16:34
  Speaker 1: In your view, is Congress likely to deal with the
• 16:38
  Speaker 1: budget deficit in a way where we won't have to
• 16:40
  Speaker 1: deal with the government shutting down. Do you think that's
• 16:44
  Speaker 1: a real risk that the government could shut down again.
• 16:47
  Speaker 3: Look, I'd say, you know, there's two issues that again
• 16:51
  Speaker 3: that I spent a lot of time on, both the
• 16:54
  Speaker 3: debt ceiling and government funding. So as Treasury, we could
• 16:58
  Speaker 3: have the money and not be able to spend it
• 17:01
  Speaker 3: right because of government funding, or we could have the
• 17:05
  Speaker 3: government funding but not have enough money because of the
• 17:08
  Speaker 3: dead ceiling.
• 17:09
  Speaker 4: My major focus was the dead.
• 17:11
  Speaker 3: Ceiling, and one of the things I think now is
• 17:13
  Speaker 3: the most important issue is the Republicans need to get
• 17:17
  Speaker 3: the dead ceiling into a reconciliation bill quickly and raise
• 17:21
  Speaker 3: the dead ceiling.
• 17:22
  Speaker 1: In nineteen seventeen, the death ceiling was first imposed, and
• 17:26
  Speaker 1: we've now raised it more than ninety times. President Trump
• 17:30
  Speaker 1: has said before we should get rid of the dead ceiling,
• 17:32
  Speaker 1: and we're the only country in the world with one
• 17:34
  Speaker 1: other than Denmark. So what is your view on do
• 17:37
  Speaker 1: we need a dead ceiling because we can we changed
• 17:39
  Speaker 1: it all the time anyway, or should we just keep
• 17:41
  Speaker 1: the dead ceiling.
• 17:42
  Speaker 3: Well, given the side of the debt that we have
• 17:46
  Speaker 3: today and the focus on the debt, I would keep
• 17:48
  Speaker 3: the dead ceiling. I think it's an important mechanism. It's
• 17:51
  Speaker 3: become too political, but I think spending and the dead
• 17:55
  Speaker 3: ceiling should be passed at the same time. So whenever
• 17:59
  Speaker 3: Congress passed is whatever the spending is, they should simultaneously
• 18:03
  Speaker 3: pass the debt ceiling so that you can afford to
• 18:06
  Speaker 3: pay for that. But I don't think, you know, unlimited
• 18:10
  Speaker 3: spending is a good thing. As I mentioned earlier, you
• 18:13
  Speaker 3: know COVID, we had to do trillion dollars spending. We
• 18:16
  Speaker 3: then got spending out of control, and we need to
• 18:19
  Speaker 3: get that back into control.
• 18:21
  Speaker 2: Now.
• 18:21
  Speaker 1: Many countries around the world have something called a sovereign
• 18:24
  Speaker 1: wealth fund, and the United States doesn't have that. We
• 18:27
  Speaker 1: have the printing press, we print dollars and people buy
• 18:30
  Speaker 1: those dollars, but we don't have.
• 18:32
  Speaker 2: A sovereign wealth fund.
• 18:32
  Speaker 1: President Trump has signed an executive order I think, creating
• 18:35
  Speaker 1: a sovereign wealth fund. Where would the money come from
• 18:38
  Speaker 1: for that sovereign wealth fund?
• 18:40
  Speaker 3: Well, David, as you know, most countries that have sovereign
• 18:42
  Speaker 3: wealth funds are because they have certain resources today that
• 18:47
  Speaker 3: are going to be limited.
• 18:48
  Speaker 4: Obviously, oil and energy.
• 18:50
  Speaker 3: Is a big focus, and the purpose of the sovereign
• 18:52
  Speaker 3: wealth fund is to capture a huge amount of those
• 18:56
  Speaker 3: revenues today so that it can be spent over generations.
• 19:00
  Speaker 4: The US is not in that situation.
• 19:02
  Speaker 3: So if we're going to have a sovereign wealth fund,
• 19:05
  Speaker 3: I think obviously we'd have to borrow to put the
• 19:08
  Speaker 3: money in the sovereign wealth fund since we don't have
• 19:10
  Speaker 3: a surplus. And if we did that, I think you
• 19:12
  Speaker 3: should be very limited in scope. For are there certain
• 19:16
  Speaker 3: areas that we need government support, It shouldn't be used,
• 19:20
  Speaker 3: obviously to crowd out private investments.
• 19:23
  Speaker 1: The third rail of American politics is thought to be
• 19:25
  Speaker 1: the social Security system and medicare. Some people say, ultimately
• 19:30
  Speaker 1: we were running out of money to fund the social
• 19:32
  Speaker 1: Security system because people are living longer and so forth,
• 19:36
  Speaker 1: and we have more people retiring and then living longer.
• 19:40
  Speaker 1: Are you worried about the security of the subsecurity system.
• 19:44
  Speaker 3: David, One of the big titles I had in government
• 19:47
  Speaker 3: was managing Trustee of the Social Security Trust Fund. And
• 19:52
  Speaker 3: when I got there, I thought I actually could do
• 19:55
  Speaker 3: a lot of good. And one of the things I
• 19:57
  Speaker 3: was actually very focused on social securities. Still has paper cards,
• 20:02
  Speaker 3: and I thought, one of the most ridiculous thing is
• 20:04
  Speaker 3: the social Security number is the identifier most people use.
• 20:08
  Speaker 3: I wanted to focus on creating electronic ID and I
• 20:12
  Speaker 3: think that's still something we should do now. As it
• 20:14
  Speaker 3: relates to the Trust Fund, we did sure report every
• 20:17
  Speaker 3: year the trust Fund is going to run out of money,
• 20:19
  Speaker 3: and I think it's something that Congress has to deal with.
• 20:24
  Speaker 3: I hope that in the second half of the president's
• 20:27
  Speaker 3: term he can focus on Social Security reform because it's
• 20:32
  Speaker 3: a problem. The fund is going to run out of
• 20:34
  Speaker 3: money and there's lots of people who rely upon it,
• 20:36
  Speaker 3: so it needs to be fixed.
• 20:38
  Speaker 1: Bismark. I think it used to said that the two
• 20:40
  Speaker 1: things you don't want to see being made are sausage
• 20:44
  Speaker 1: and legislation. And what is it like when you're doing
• 20:48
  Speaker 1: tax bills. You're sitting in a smoke filled room and
• 20:51
  Speaker 1: you're sitting there with the members of Congress and they say,
• 20:54
  Speaker 1: I'll give you this, and you give me this, and
• 20:56
  Speaker 1: how does that really work?
• 20:57
  Speaker 3: You know, we worked very closely with the House and Senate.
• 21:00
  Speaker 3: These are huge, complicated issues. Of course, there have to
• 21:03
  Speaker 3: be trade offs. You have to think of how they
• 21:05
  Speaker 3: were paid for us. I mean, when we did this
• 21:07
  Speaker 3: the first time, it was a trillion and a half
• 21:09
  Speaker 3: dollars static, trillion dollars dynamic, and we had about five
• 21:13
  Speaker 3: hundred billion in what we considered to be baseline issues.
• 21:17
  Speaker 3: So of course there have to be trade offs, and
• 21:20
  Speaker 3: then I would just comment on even once tax reform
• 21:23
  Speaker 3: was passed, we spent the next year writing tax regulations
• 21:26
  Speaker 3: and treasury which is a very important function to institute
• 21:30
  Speaker 3: the law.
• 21:30
  Speaker 1: So, if you were king for today and you can
• 21:33
  Speaker 1: make any change in the way the economy, the finance
• 21:37
  Speaker 1: structured the United States is based, the spending is done,
• 21:40
  Speaker 1: what would be the one thing that you think we
• 21:41
  Speaker 1: should do to make our economy better or make our
• 21:44
  Speaker 1: financial system better than it is today.
• 21:46
  Speaker 3: One thing I would reform the spending process and the
• 21:52
  Speaker 3: debt sealing process so that there was a real process
• 21:55
  Speaker 3: of the administration having a budget, that budget going through
• 21:59
  Speaker 3: Congress every year, and that kind of the focus around spending.
• 22:04
  Speaker 1: Okay, so for the time being, you're going to be
• 22:07
  Speaker 1: in the private sector, You're not going to be drafted
• 22:10
  Speaker 1: back in the government, and you're happy with the highest
• 22:12
  Speaker 1: calling of mankind that you're now pursuing private equity.
• 22:15
  Speaker 3: Right, the highest calling was serving the people in the environment.
• 22:21
  Speaker 4: I know you think this is the highest.
• 22:23
  Speaker 1: Thanks for listening to hear more of my interviews. You
• 22:26
  Speaker 1: can subscribe and download my podcast on Spotify, Apple, or
• 22:30
  Speaker 1: wherever you listen