Latest / Trumponomics / Scott Bessent’s Uphill Battle Against America’s Debt

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Scott Bessent’s Uphill Battle Against America’s Debt · Trumponomics

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: He wants to abolish the penny. He doesn't want to
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  Speaker 2: abolish it as much as he wants to give his
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  Speaker 2: boss a reason why we can't.
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  Speaker 1: Well it's stupid.
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  Speaker 3: Yeah, The thing is.
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  Speaker 2: It isn't really really.
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  Speaker 1: Turns out, the majority of pennies not circulating, thin going jars,
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  Speaker 1: sock drawers. Two thirds of the pennies produced in the
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  Speaker 1: last thirty years have dropped out of circulation.
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  Speaker 3: Well, it's taken more than twenty years. But in his
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  Speaker 3: efforts to save federal dollars, President Donald Trump has boldly
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  Speaker 3: gone where no other president, fictional or otherwise you just
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  Speaker 3: heard from a West Wing clip, has ever dared to go.
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  Speaker 3: He's told the Treasury to stop printing pennies. Now, that
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  Speaker 3: will definitely save money, maybe as much as one hundred
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  Speaker 3: and seventy nine million dollars. After all, it each penny
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  Speaker 3: costs more than three cents to make, apparently, but pennies
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  Speaker 3: aren't going to fill the hole in the federal budget
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  Speaker 3: for that. According to Treasury Secretary Scott Bessant, you need
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  Speaker 3: the Department of Government Efficiency DOGE to cut spending radically,
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  Speaker 3: and you need deregulation to raise US growth. I'm Stephanie Flanders,
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  Speaker 3: head of Government and Economics at Bloomberg, and welcome to
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  Speaker 3: trump Anomics, the Bloomberg podcast that looks at the economic
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  Speaker 3: world of Donald Trump, how he's already shaped the global economy,
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  Speaker 3: and what on earth is going to happen next. Our
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  Speaker 3: question this week is could the besant Trump musk plan
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  Speaker 3: for keeping control of America's debt possibly work? We have
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  Speaker 3: the perfect Trump economists to help me do it. Bloomberg
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  Speaker 3: columnist and senior advisor to Bloomberg Economics, Bill Dudley, who
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  Speaker 3: spent quite a large part of his career thinking about
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  Speaker 3: the US treasury market as chief economist to Goldman Sachs
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  Speaker 3: and then president of the New York Federal Reserve. Bill,
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  Speaker 3: welcome and thank you.
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  Speaker 1: Great to be here.
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  Speaker 3: And back again. Anna Wong, chief US economist here at
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  Speaker 3: Bloomberg and formerly also an economist at the Federal Reserve
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  Speaker 3: and Donald Trump's Council of Economic Advisors in his first term.
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  Speaker 2: Thanks Stephanie, good to be here.
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  Speaker 3: Now. People listening are probably fed up with people saying
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  Speaker 3: Donald Trump as president is acting like the real estate
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  Speaker 3: developer he used to be. Well for one thing, it's
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  Speaker 3: just too easy to say, especially when he starts talking
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  Speaker 3: about all that beachfront property he's going to build in Gaza.
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  Speaker 3: But there is another way that President Trump has been
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  Speaker 3: reminding me more and more of his former self. He
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  Speaker 3: keeps talking as if the US government has a lot
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  Speaker 3: more money than it really does. We're going to buy greenland,
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  Speaker 3: invest hundreds of billions in Ai, do what oil rich
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  Speaker 3: nations like Katara and Norway do, and set up a
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  Speaker 3: sovereign wealth fund. Now, these are all things that require
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  Speaker 3: big bucks, and well, the US doesn't have a lot
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  Speaker 3: of free money to spend. What it has, in fact,
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  Speaker 3: is a whole lot of debt. Bill let me start
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  Speaker 3: with you. You wrote a column in November after Scott
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  Speaker 3: Bessont was nominated, saying he would face two big challenges
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  Speaker 3: if confirmed by the Senate. Ensuring that the world's largest
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  Speaker 3: government debt market functions properly was the first, and pursuing
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  Speaker 3: a fiscal policy that doesn't send the country's debt service
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  Speaker 3: costs soaring was the second. Now, we are obviously going
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  Speaker 3: to focus on that one, the fiscal challenge in a
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  Speaker 3: little bit, But given all the developments recently at the
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  Speaker 3: Department of Treasury. I guess I have to ask you,
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  Speaker 3: are you more or less confident today of this administration's
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  Speaker 3: handle on the treasury market and its ability to make
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  Speaker 3: sure it's functions smoothly than you were when you wrote
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  Speaker 3: that column in November.
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  Speaker 1: I actually am, Because Scott Besset is a market guy.
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  Speaker 1: He understands markets, He understands the importance of good communication
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  Speaker 1: from the Treasury to markets about what the Treasury is
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  Speaker 1: trying to accomplish in terms of debt issuance. And I
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  Speaker 1: think he's very sensitive to the level of long term meals.
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  Speaker 1: One of his desires is to get long term meals down,
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  Speaker 1: and so that's also going to make him very careful
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  Speaker 1: about doing anything you know, radical in terms of changing
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  Speaker 1: treasury debt management practices, are changing the schedule of issues.
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  Speaker 1: So I think the big issue on you know, the
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  Speaker 1: treasury market function is really about fiscal policy. Sustainable physical policy,
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  Speaker 1: probably pretty manageable treasury debt market. Non sustainable physical policy,
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  Speaker 1: then the treasure market.
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  Speaker 3: Is going to bark with the doge guys or the
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  Speaker 3: doge bags as some of them have been called. But
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  Speaker 3: these sort of young coders getting access to the treasuries,
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  Speaker 3: various systems which have had a lot more attention than
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  Speaker 3: they've probably ever had in their lives, or the various
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  Speaker 3: systems sitting in the Treasury. I've heard even from some
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  Speaker 3: on Wall Street, some concern about accidentally, you know, a
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  Speaker 3: bit of code going awry somehow, that damaging payment's going
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  Speaker 3: out to the global market on treasury bills or other things.
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  Speaker 3: We've had President Trump say they found irregularities in the
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  Speaker 3: some of the debt. When you were sitting in the
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  Speaker 3: New York Fed you were very closely involved, but certainly
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  Speaker 3: very close to the day to day functioning of that market.
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  Speaker 3: Should we take any of those sort of technical worries seriously, Well.
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  Speaker 1: It's hard to know exactly what's transpiring, so it's hard
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  Speaker 1: to evaluate how big a concern you must you might have.
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  Speaker 1: I mean, you know, I can focus more on sort
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  Speaker 1: of the treasury issuance, and I'm not very worried about
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  Speaker 1: that because the Federal Reserve handles the auctions of the
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  Speaker 1: new TI Treasury debt on behalf of the Treasury, So
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  Speaker 1: I don't worry that that's going to be upset to
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  Speaker 1: any significant degree. But obviously, you know, if the payments
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  Speaker 1: are you interfered with? And that reduces the confidence and
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  Speaker 1: the timeliness of the US government making good on its obligations.
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  Speaker 1: That could be obviously, you know, disturbing, But I just
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  Speaker 1: think it's hard for us, you know, sitting where we
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  Speaker 1: sit to value. Wait, I know how big of riskless is?
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  Speaker 2: No?
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  Speaker 3: I think that's right. Well, I think we can evaluate
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  Speaker 3: at least the plausibility of the bigger fiscal challenge that
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  Speaker 3: Scott Besson is facing has set himself but is also
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  Speaker 3: just facing in his current job. He's talked about three
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  Speaker 3: three three as his goal. Three percent economic growth a
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  Speaker 3: year for the US, a three percent budget deficit, federal borrowing,
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  Speaker 3: and an additional three million more barrels of oil produced today.
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  Speaker 3: That sounds like it would all be quite good for
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  Speaker 3: keeping a handle on debt service costs. But I guess
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  Speaker 3: the real question is can he get there? And I
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  Speaker 3: asked you that sort of in a very flippant version
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  Speaker 3: of that question on Monday night in an email, and
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  Speaker 3: then you, being you, spent a long time that night
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  Speaker 3: calculating a very non flippant response, and I felt rather
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  Speaker 3: guilty in the morning for having kept you up. But
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  Speaker 3: you did work out a way that the bestent plan
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  Speaker 3: could be achieved. So just tell me what needs to
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  Speaker 3: go right for that to happen.
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  Speaker 2: Okay, So to evaluate whether the mass works out, we
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  Speaker 2: utilize the Bloomberg Economics fiscal sustainability model, where I could
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  Speaker 2: input paths of nominal GDP growth and primary balances, assumptions
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  Speaker 2: and primary balances, and also assumptions of interest rate, the
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  Speaker 2: term structure.
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  Speaker 3: So just to go back, just to give people a sense,
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  Speaker 3: it's sort of a tool that we have for playing
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  Speaker 3: around with different scenarios for US fiscal policy. And the
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  Speaker 3: things that you're changing, among other things, is the cost
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  Speaker 3: of borrowing, the bond yield, but also the primary budget balance,
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  Speaker 3: which is kind of how much you're borrowing before you
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  Speaker 3: get to the money you need to pay off your
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  Speaker 3: debt to be doing servicing the debt.
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  Speaker 2: Correct and also GDP growth. The three pillars of besons
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  Speaker 2: ideal scenario or his goals in the next few years
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  Speaker 2: is this three three three right. The first three refers
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  Speaker 2: to three percent fiscal deficit currently Untracked hit about six
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  Speaker 2: percent this year of GDP, and our baseline forecast has
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  Speaker 2: it going out to nine percent of GDP in ten years. Time,
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  Speaker 2: and Scott Besson's goal is to reduce it to three
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  Speaker 2: percent of GDP. The second pillar of his three refers
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  Speaker 2: to three million additional barrels per day of oil production.
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  Speaker 2: He thinks that by doing so it will generate non
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  Speaker 2: inflationary growth. And the third final pillar is three percent
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  Speaker 2: real GDP growth. So real GDP growth in the past
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  Speaker 2: year was two point three percent, and it was already
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  Speaker 2: quite a phenomenal year. The long term potential GDP growth
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  Speaker 2: rate for US economy is about one point seven percent.
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  Speaker 2: So basically, in Besson's ideal scenario, every year we're seeing
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  Speaker 2: one point three percent additional percentage of growth. So I
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  Speaker 2: know Bill is going to talk about the plausibility of
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  Speaker 2: these assumptions, but you know what, I was just going
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  Speaker 2: to put all these three assumptions into the model and
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  Speaker 2: see what it spits out. So what it did spit
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  Speaker 2: out is that, Oh, by the way, another additional assumption
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  Speaker 2: I put in is DOGE. So I am assuming that
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  Speaker 2: DOGE is able to successfully reduce spending by four hundred
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  Speaker 2: billion per year. And just to give some context of
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  Speaker 2: what that means, So in the current fiscal year, about
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  Speaker 2: twenty five percent of US government spending is indiscretionary purchases
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  Speaker 2: versus seventy five percent in mandatory for as things such
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  Speaker 2: as medicare, social Security, and also paying off the interest
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  Speaker 2: on your fiscal debt.
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  Speaker 3: So what DOESE is working with is only twenty five
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  Speaker 3: percent of the overall spending.
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  Speaker 2: Correct if they want to keep Trump's promise, which is
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  Speaker 2: not to touch anything related to the mandatory social security payments.
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  Speaker 2: So even within the discretionary that twenty five percent discretionary,
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  Speaker 2: twelve percent is defense. And surely we cannot really reduce
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  Speaker 2: defense spending in the midst of elevated geopolitical tensions.
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  Speaker 3: What he wants to increase it in fact.
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  Speaker 2: Right, So really we are talking about about one trillion
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  Speaker 2: non defense discretionary spending. So in fact Elon Musk's original
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  Speaker 2: pledge of cutting by one trillion is unattainable by this,
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  Speaker 2: you know, if he they are really touch the right
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  Speaker 2: change right, right, right, But anyway, I digress. So the
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  Speaker 2: point is, let's assume that DOGE is able to cut
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  Speaker 2: spending by four hundred billion for a year, which is
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  Speaker 2: half of the almost half of the non defense discretionary spending.
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  Speaker 2: How do I come up with four hundred billion per year.
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  Speaker 2: Scott Besson mentioned the Grace Commission Report, which is a
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  Speaker 2: report commissioned by Ronald Reagan in nineteen eighty two to
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  Speaker 2: come up with recommendations on how to increase government efficiency
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  Speaker 2: and reduce fiscal spending. And that Grace Report basically came
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  Speaker 2: up with in today's dollar, one point three trillion dollar
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  Speaker 2: of cost saving across three years, which average to be
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  Speaker 2: about four hundred billion per year.
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  Speaker 3: And I think if he managed that, he would declare
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  Speaker 3: a great success because he said a trillion. He never
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  Speaker 3: said a trillion a year, I guess, so yeah, he
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  Speaker 3: would count four hundred billion as a massive win.
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  Speaker 2: Yes, four hundred billion would be a massive, massive win
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  Speaker 2: because that is forty percent of non defense discretionary spending.
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  Speaker 2: So in putting all of that into our model, what
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  Speaker 2: we were able to find is that whoe that indeed
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  Speaker 2: could lower the federal debt to GDP ratio from our
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  Speaker 2: current baseline of one point thirty do about one hundred
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  Speaker 2: percent of GDP growth, So thirty percentage point decline in
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  Speaker 2: debt to GDP ratio.
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  Speaker 3: So just to be clear, it's we're nearly at one
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  Speaker 3: hundred now, So the stock of debt is almost the
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  Speaker 3: whole value of our annual output. In our sort of
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  Speaker 3: what we would consider to be more plausible scenario without
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  Speaker 3: all of this happening, groat's not picking up massively, without
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  Speaker 3: having an enormous reduction in non discretionary spending. We thought
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  Speaker 3: that debt was going to go to about one hundred
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  Speaker 3: and third thirty. Yes, and you could basically stop all
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  Speaker 3: of that by doing by following this scenario.
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  Speaker 2: Yes, exactly, it's not going to go down. No, it's no, No,
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  Speaker 2: it's unfortunately it's not going to go down. But when
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  Speaker 2: you further look into what component of these I deal
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  Speaker 2: scenariow generate this thirty percentage point decline in debt to
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  Speaker 2: GDP ratio rather relative to baseline, the most important part
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  Speaker 2: really is the nominal GDP growth part, the growth pillar
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  Speaker 2: of Scott Besson's three three three. Because without the growth pillars,
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  Speaker 2: just DOSH alone, which possibly four hundred billion per year
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  Speaker 2: in savings, would reduce primary balance by about point nine
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  Speaker 2: percent of GDP per year. That will get you their
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  Speaker 2: debt to GDP racial down by ten percentage point over
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  Speaker 2: ten years. But to get the other twenty percentage point,
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  Speaker 2: it's really interest payments getting the interest long term interest
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  Speaker 2: rightdown and GDP growth up. And one of the most
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  Speaker 2: challenging part of this debt dynamics. It is indeed the
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  Speaker 2: interest payment, the debt servicing part of US debt because
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  Speaker 2: of the stock of debt and the increasing flow of that.
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  Speaker 2: Even with doche assuming four hundred billion reduction and fiscal spending,
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  Speaker 2: and in fact, by twenty seven, our net interest payment
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  Speaker 2: will exceed how much we're spending in non defense discretionary payments.
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  Speaker 2: So our net interest payments on our debt would be
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  Speaker 2: one point one trillion as of twenty twenty eight.
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  Speaker 3: That's if they didn't go up significantly. I mean that's
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  Speaker 3: of interest rates stay broadly on the path we're expecting.
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  Speaker 2: Correct, Okay, I think Bill might get into this why
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  Speaker 2: it is that the debt service payment is blowing up.
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  Speaker 2: So I think that the bottom line of this exercise
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  Speaker 2: that I did is that it reveals what an uphill
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  Speaker 2: battle the new administration has to contain the fiscal situation.
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  Speaker 2: Just because even if they do everything right they are,
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  Speaker 2: interest costs paid is set to rise and will become
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  Speaker 2: about a fifth of US GDP every year. US would
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  Speaker 2: be spending about twenty percent of the GDP in paying interest.
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  Speaker 2: And on top of that, even in Scott Besson's ideal scenario,
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  Speaker 2: the fiscal deficit would still be at six percent by
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  Speaker 2: twenty thirty five, where four percent of those six percent
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  Speaker 2: of the deficit would be interest payments.
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  Speaker 3: Okay, so this is pretty salutary for those who think
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  Speaker 3: that even the slash and burn will at least have
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  Speaker 3: this sort of positive side that you'll get control of
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  Speaker 3: America's debt bill. You've been around the block a few
• 15:45
  Speaker 3: times when you hear that kind of arithmetic, and we
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  Speaker 3: still end up with a pretty large debt service cost.
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  Speaker 3: How plausible do you think any of this conversation is not.
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  Speaker 1: Very plausible, probably for the numbers that to an outline,
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  Speaker 1: But it's also not plausible because think about the three
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  Speaker 1: percent GDP growth target. We're starting to deport workers from
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  Speaker 1: the United States, so we're actually lowering the growth rate
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  Speaker 1: of the labor force. The layor force isn't going to
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  Speaker 1: grow at all, probably over the next couple of years,
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  Speaker 1: both because of deportations and because of the retirement of
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  Speaker 1: the Baby Boom generation. So to get to three percent
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  Speaker 1: GDP growth, it's got to all be come through productivity.
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  Speaker 1: You need enormous productivity games to get to three percent
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  Speaker 1: GDP growth. I don't see how that happens, especially when
• 16:26
  Speaker 1: you're disrupting the global trading system by putting teris on
• 16:30
  Speaker 1: across a lot of different products and it against a
• 16:33
  Speaker 1: lot of different countries. So you're introducing a lot of
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  Speaker 1: friction into the global economy, into the US economy. So
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  Speaker 1: I think the three percent GDP goal is not feasible.
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  Speaker 1: We're at full employment today, so GDP growth is going
• 16:47
  Speaker 1: to be basically labor force growth and productivity. No labor
• 16:50
  Speaker 1: force growth, so you're talking about productivity growth. Productivity growth
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  Speaker 1: is good, maybe you can get one and a half
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  Speaker 1: two percent. So I think three percent GDP growth is
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  Speaker 1: not doable under the current regime. So the deficit, you're
• 17:01
  Speaker 1: going to have slower GDP growth, you can have less
• 17:04
  Speaker 1: tax revenue from a faster GDP. You can have the
• 17:07
  Speaker 1: retirement of the baby boom generations that drives up entitlement
• 17:10
  Speaker 1: spending sor automatically on Medicare and Social Security, which the
• 17:13
  Speaker 1: Trump administration has ruled is off off out of bounds.
• 17:17
  Speaker 1: They can't they're not going to touch that. And then
• 17:19
  Speaker 1: we have the repricing of all the debt that was
• 17:22
  Speaker 1: issued over the last few years at much lower interest rates.
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  Speaker 1: Death service costs are going to go significantly. So it's
• 17:28
  Speaker 1: a cleverest slogan, the three three three, But I think
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  Speaker 1: the chances of it actually being accomplished is very remote.
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  Speaker 3: If this was an emerging market economy, you might say, well,
• 17:39
  Speaker 3: hang on a minute, with numbers like this, surely they're
• 17:41
  Speaker 3: just going to inflate away the debt. What would a
• 17:44
  Speaker 3: bit of higher inflation. I mean, it certainly helps with that.
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  Speaker 3: That Anna was talking through the arithmetic of the nominal GDP,
• 17:49
  Speaker 3: the cash GDP that gets bigger relative to the debt
• 17:53
  Speaker 3: if you have inflation.
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  Speaker 1: Bill Well, absolutely, we saw the debt to GDP ratio
• 17:59
  Speaker 1: go down during the pandemic, not because the counting was
• 18:01
  Speaker 1: doing well, but because nonmal GDP was growing very quickly
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  Speaker 1: because of very high inflation. So yeah, higher inflation, faster
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  Speaker 1: nomal GDP growth, that you can actually reduce debt. But
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  Speaker 1: as we've seen, that's not really a politically feasible solution
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  Speaker 1: because we've seen that people hate inflation. So if the
• 18:20
  Speaker 1: Trump administration goes down the path of sort of saying
• 18:23
  Speaker 1: let's have more inflation, and that will inflate away the
• 18:26
  Speaker 1: debt that's not going to be politically feasible. Also, you know,
• 18:29
  Speaker 1: the Fed Reserve is going to continue to do their job.
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  Speaker 1: I mean, there is a lot of questions about, you know,
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  Speaker 1: the Trump administration raining in the independence of the FED,
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  Speaker 1: But first of all, I don't think that's easily easy
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  Speaker 1: to accomplish, and before it's accomplished, the FED is going
• 18:43
  Speaker 1: to continue to be on the case of trying to
• 18:46
  Speaker 1: push inflation back sustainably down to two percent. I think
• 18:50
  Speaker 1: the Fed's credibility is still quite high, and you can
• 18:53
  Speaker 1: see that by the fact that despite inflation running above
• 18:56
  Speaker 1: the FED subjective for four years now, long term inflation
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  Speaker 1: expert dictations are still pretty well anchored around two percent.
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  Speaker 1: So markets believe that the Federal Reserve is going to
• 19:04
  Speaker 1: do their job. I believe that the Federal Reserve is
• 19:07
  Speaker 1: going to do their job. Doing their job, though will
• 19:09
  Speaker 1: probably make the Trump administration unhappy with the FED.
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  Speaker 3: I suspect if I was Elon Musk, I would think
• 19:14
  Speaker 3: that all of us, and certainly you and Anna were
• 19:19
  Speaker 3: sort of trapped in a very kind of narrow mindset
• 19:22
  Speaker 3: that you weren't realizing the potential of this exciting world,
• 19:26
  Speaker 3: you know, deregulation, AI, all of those things could transform
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  Speaker 3: productivity in growth.
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  Speaker 1: Now they could, but it takes these things take a
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  Speaker 1: long time to sort of play out. I mean, you
• 19:37
  Speaker 1: look at you know, the in the development of electricity
• 19:40
  Speaker 1: generation in the US in the late nineteenth century. It
• 19:43
  Speaker 1: took about twenty years for that actually to change how
• 19:45
  Speaker 1: we actually did man in factoring. So you have the
• 19:47
  Speaker 1: invention and then and then and you have to figure
• 19:50
  Speaker 1: out how do you actually use it in your business processes,
• 19:54
  Speaker 1: And to really get the benefits of things like artificial intelligence,
• 19:57
  Speaker 1: you actually have to change how you're organized, how you
• 20:00
  Speaker 1: conduct business, and that takes quite a bit of time. So,
• 20:04
  Speaker 1: you know, we can, you know, we can debate about
• 20:05
  Speaker 1: how big AI is going to turn out to be,
• 20:07
  Speaker 1: but even if it does turn out to be transformational,
• 20:10
  Speaker 1: I think it's going to take quite a long time
• 20:12
  Speaker 1: to play on. And I think that same it's true
• 20:14
  Speaker 1: for deregulation. I don't think you you know, can deregulate,
• 20:18
  Speaker 1: you know, very quickly. And even if you deregulate, how
• 20:21
  Speaker 1: much benefit are you going to get it? People think about, well,
• 20:24
  Speaker 1: what's going to happen four years from now, when maybe
• 20:26
  Speaker 1: the Trump administration is not empowered and all those regulations
• 20:30
  Speaker 1: come back. Are you really going to change your investment
• 20:32
  Speaker 1: behavior because things are better now? Or are you going
• 20:35
  Speaker 1: to be concerned that this deregulation effort is going to
• 20:39
  Speaker 1: fade away once we get to the to the next administration.
• 20:43
  Speaker 3: Anna, I will say, looking at your numbers, it did
• 20:47
  Speaker 3: make sense to me why Scott Besendon his interview that
• 20:50
  Speaker 3: he did with US with Salaiah Mosen last week, he
• 20:54
  Speaker 3: was focused so much on bond yields, on long term
• 20:58
  Speaker 3: borrowing costs for the government. That's the key factor in
• 21:01
  Speaker 3: even making your numbers add up right exactly.
• 21:05
  Speaker 2: I mean, after I conducted that exercise, it's clear why
• 21:10
  Speaker 2: It's not just Scott Bessons. We also have heard from
• 21:13
  Speaker 2: Trump a week agode that all of a sudden he
• 21:17
  Speaker 2: approved the way that Federal Reserve is conducting monetary policy.
• 21:21
  Speaker 2: He said he thinks the Fed is correct to keep
• 21:25
  Speaker 2: rates constant, which was a very surprising thing because.
• 21:30
  Speaker 3: Just so earlier this week he seems to have gone
• 21:31
  Speaker 3: back on that. He's tweeted or truthed that he wanted
• 21:38
  Speaker 3: he thought interestrates should go down as he's putting tariffs in.
• 21:41
  Speaker 1: Well, don't expect consistency here.
• 21:45
  Speaker 2: Is he saying that Fed should lower rates or is
• 21:48
  Speaker 2: he referring to the tenure yields?
• 21:49
  Speaker 3: Yeah, it's a good question. I don't know that he's.
• 21:51
  Speaker 2: Actually talking to the market now because he realized after
• 21:56
  Speaker 2: the one hundred bases point spike in ten year yields
• 21:59
  Speaker 2: since the Fed started reducing rates, Trump realized that the
• 22:03
  Speaker 2: Fed doesn't hold the key to long term interest rates.
• 22:06
  Speaker 3: H that's interesting. So the final thought, I think we
• 22:12
  Speaker 3: all agree that making growth, getting growth up, increasing productivity
• 22:16
  Speaker 3: is really hard. Seriously slowing the path of spending and
• 22:21
  Speaker 3: cutting the budget deficit, it's hard. Actually, the last time
• 22:24
  Speaker 3: we did both of those things we saw a significant
• 22:26
  Speaker 3: increase in productivity and a significant reduction in the budget
• 22:29
  Speaker 3: deficit was in the Clinton years, as Anna pointed out
• 22:32
  Speaker 3: on doing Boy Television the other day. And you know,
• 22:34
  Speaker 3: times were very different then, especially in Washington, and people
• 22:38
  Speaker 3: tend to say, oh, he could do that, he could
• 22:40
  Speaker 3: cut the deficit because politics was much less polarized. But
• 22:44
  Speaker 3: I was reminding myself that actually there wasn't much bipartisanship
• 22:47
  Speaker 3: in that area. Even then, there was not a single
• 22:49
  Speaker 3: Republican who voted for the Clinton Deficit Reduction Act. So
• 22:54
  Speaker 3: I guess i'd ask both of you, whatever we think
• 22:56
  Speaker 3: about the way that DOGE is going about well constitutionality
• 23:03
  Speaker 3: of some of what's happened, is there an advantage to
• 23:06
  Speaker 3: having a strong executive and a rather supine Congress if
• 23:10
  Speaker 3: you're going to actually make progress on any of these things.
• 23:12
  Speaker 3: I guess I'll start with you Anna.
• 23:14
  Speaker 2: Well, Stephanie. You know, it's funny because the other day
• 23:17
  Speaker 2: I met with somebody who actually tried to deregulate but failed,
• 23:23
  Speaker 2: and I asked him what's the lessons? Were the lessons?
• 23:26
  Speaker 2: So he is actually Lord Dominic Johnson from UK, who
• 23:31
  Speaker 2: is the co chair of the UK Conservative Party, and
• 23:35
  Speaker 2: he was just speaking about DOGE at Harvard Kennedy School
• 23:38
  Speaker 2: also and he said the reason why it's very difficult
• 23:43
  Speaker 2: to get the support for degregulation, which is a key
• 23:48
  Speaker 2: pillar of the Trump administration's vision to generate non inflationary growth,
• 23:53
  Speaker 2: Lord Johnson, it's because the beneficiaries of deregulation is very diffuse,
• 23:59
  Speaker 2: Whereas there are a lot of wetted constituents who are
• 24:02
  Speaker 2: benefiting from the regulations and who would really complain very loudly.
• 24:07
  Speaker 2: So at the end of the day, it's very hard
• 24:09
  Speaker 2: to get the kind of support you need to push
• 24:11
  Speaker 2: through these policies. So as a result, he would advocate
• 24:16
  Speaker 2: that the way to conduct to really cut government spending
• 24:20
  Speaker 2: and deregulate is to go bold and break things and
• 24:25
  Speaker 2: then start from scratch again. He at least from a
• 24:28
  Speaker 2: person who has done this and failed. He said, that's
• 24:32
  Speaker 2: the way. So I think that's pretty interesting. Bill.
• 24:36
  Speaker 1: Well, you can certainly do more if you act in
• 24:39
  Speaker 1: this kind of aggressive fashion. But you know, I worry
• 24:44
  Speaker 1: about the indiscriminate nature of this approach because there is
• 24:48
  Speaker 1: some regulation that actually does good. For sure. I certainly
• 24:52
  Speaker 1: like the fact that we have an FDA that make
• 24:55
  Speaker 1: sure that drugs are safe. I'm glad we have a
• 24:57
  Speaker 1: Transportation Environment Transfer Tation that makes sure that the planes
• 25:02
  Speaker 1: sight flies safely and uh, real traffic moves safely. So
• 25:08
  Speaker 1: this idea that you know, all the all the regulation
• 25:10
  Speaker 1: we have is sort of for non productive uses, you know,
• 25:13
  Speaker 1: has not productive benefits. I think that's that's something that
• 25:17
  Speaker 1: I think is just not true. And then the question
• 25:19
  Speaker 1: is how do you determine the good stuff from the
• 25:22
  Speaker 1: bad stuff? And I think that's really really difficult to do.
• 25:25
  Speaker 1: I think the approach that's being taken right now is
• 25:27
  Speaker 1: pretty indiscriminate. So I would imagine that, you know, some
• 25:30
  Speaker 1: regulation that should go away is probably going to be eliminated.
• 25:33
  Speaker 1: But I also worry that some regulation is actually very
• 25:36
  Speaker 1: supportive to the well functioning economy and protects the households
• 25:40
  Speaker 1: and businesses is also going to be you know, so
• 25:42
  Speaker 1: it's going to be throwing it and the baby out
• 25:43
  Speaker 1: with the bathwater. That's what I'd be worried about.
• 25:46
  Speaker 3: Well, this is the way to find out. I guess
• 25:48
  Speaker 3: that you get rid of everything and then see whether
• 25:50
  Speaker 3: anyone notices, or you get rid of quite a lot
• 25:53
  Speaker 3: to see if anyone notices. I mean, I say that flippantly,
• 25:56
  Speaker 3: but actually the fiscal the austerity quote unquotes that was
• 26:00
  Speaker 3: in the UK after the global financial crisis, the really
• 26:03
  Speaker 3: significant cut was in local government spending, and it took
• 26:09
  Speaker 3: quite a long time for people to realize that those
• 26:11
  Speaker 3: cuts had come in places that we were really going
• 26:14
  Speaker 3: to notice down the road. So it might take longer
• 26:17
  Speaker 3: than you thing. Thank you very much, Bill, and Anna
• 26:21
  Speaker 3: occurred to me. I've been saying over the last few
• 26:24
  Speaker 3: weeks that Wall Streets seemed to be betting on the
• 26:26
  Speaker 3: best of all possible trumps. But I realized, because we're
• 26:28
  Speaker 3: going through as numbers, it's the bestn't of all possible trumps.
• 26:32
  Speaker 3: Ho ho. Thank you for listening to Trumpnomics from Bloomberg.
• 26:40
  Speaker 3: It was hosted by Me, Stephanie Flanders, and I was
• 26:42
  Speaker 3: joined by Bill Dudley and Anna Wong. Trumpnomics is produced
• 26:46
  Speaker 3: by Sammer Sadi and Moses and Am with help from
• 26:48
  Speaker 3: Chris Martlou. Sound designed by Blake Maples. Brendan Francis Newnham
• 26:54
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• 27:00
  Speaker 3: me wherever you listen to your podcast
• 27:08
  Speaker 2: Mm hmm