Treasury Secretary Bessent CNBC interview - May 5

[dan_s]

Mr. Bessent said:

The message is that the economic program is a three-part stool; trade, tax, and deregulation

With tax bill, aiming to go back to 100% expensing for equipment; new aspect is adding 100% expensing for actual factory structure < This will send the U.S. economy and stock market up. Growing economy, especially lots of new factory building, will increase demand for energy.
It takes a lot of diesel to build a factory.

Going to make 2017 Tax Cuts and Jobs Act "permanent." There will be stimulus from the permanence of 2017 tax cuts.

When I look in the mirror, I see a deficit hawk; every $300 billion in cuts is 1% of GDP

The way to cut things smartly is to bring deficit down by about 100 basis every year for four years, which gets us back to long-term average of 3.5%; a big cure for the deficit is an upward growth shock

Can get back to 3% growth by this time next year

On one side, we are going to cut government spending; on the other side, a substantial financial deregulatory agenda is coming

Thinks we're very close to some trade deals, maybe as early as this week, as the president suggested on Air Force One

The goal of trade deals is twofold: (1) open foreign markets and (2) bring back manufacturing to the U.S.

Thinks we could see substantial progress with China in coming weeks; current situation is not sustainable; we'll see over the coming weeks what President Trump wants to accept

Came out of gate January 20 with two goals: getting interest rates down and oil prices lower (10-yr note yield is down from January 20 and oil prices are lower) < Oil prices are set by the global supply/demand fundamentals. The U.S. does not have a national oil company. Political "noise" cannot hold down oil prices for long because lower fuel prices increase demand and we are heading into the highest demand period of the year. Low crude oil prices lead to less supply, which will lead to higher oil prices.

1-yr-1yr forward and 5-yr-5yr forward are down for the year; market is not pricing in inflation

There is survey data that talks about a slowdown but the hard data continues to be resilient < No recession with rising employment levels.