>> from the heart of where innovation, money, and power collide, in silicon valley and beyond. this is bloomberg technology with caroline hyde and ed ludlow. caroline: live from new york, i'm caroline hyde. this is bloomberg toll. we bring you the markets as we remain relatively unmoved. all eyes on scott bessent's appearing before the senate.

terrorry pick of president-elect trump. we're seeing government bonds ever so slightly change. down hatch a percent. small moves in the market with treasury secretary scott bessent appearing before the senate. let's go to capitol hill and listen in to this confirmation hearing. here is mr. bessent. >> wealth and prosperity for all americans. my life's work in the private sector has given me a deep understanding of the economy and markets and while in experience will be invaluable in crafting economic policy, i have long adhered to the principle that you should know what you don't know and lean on those who do. having never served in government, i intend, if confirmed, to be in close contact with each of you and your offices and seek your

counsel. the treasury department plays a critical role in protecting american national security. we must secure supply chains vulnerable to strategic competitors and carefulfully deploy sanctions as part of a whole of government approach to address our national security requirements and chrisically, critically, we must ensure that the u.s. dollar remains the world's reserving currency. today we face significant challenges in an economy that has not created enough opportunities for working men and women. we have a housing shortage and for the first time in my lifetime parents feel the american dream is slipping away from their children. the federal government has a significant spending problem, driving deficits that have averaged an historically high 7% of g.d.p. during the past four

years. we must work to get our fiscal house in order and adjust discretionary spending that has grown by an astonishing 40% over the past four years. productive investment that grows the economy must be prioritized over wasteful spending that drives inflationings. as we begin 2025 americans are barreling towards an economic crisis at year end. if congress fails to be act, americans will face the largest tax increase in history, a crushing there 4 trillion tax hike. we must make permanent the 2017 tax cuts and jobs act and introduce new policies to reduce the tax burden on american manufacturers, service workers and seniors. i've already spoken with several members of the committee as well as leaders of the house about the best approach to receiving

these important goals together. as president trump has said we'll unleash the american economy with burough growth, reducing taxes and unleashing production. along with our pro-growth tax policy and smart, updated regulation will come to make america most popular destination in the world for starting, growing and taking public a business and as we regrow the economy, we must use all the tools available to realign the economic system to better serve the interests of working americans. for too long, our nation has allowed unfair distortions in the international trading system. president trump was the first president in modern times to recognize the need to change our trade policy and stand up for american workers. if confirmed, i look forward to

working with president trump and members of this committee to do just that. members of the committee, these are just some of many important goals that president trump has laid out for me and others on his economic team. i firmly believe that if confirmed and if your counsel and support, we can usher in a new, more balanced era of prosperity that will lift up all americans and rebuild communities and families across the country. i hum my thank you for your consideration and am eager to take your questions. >> thank you, mr. bessent. before i begin, i want to reemphasize how appreciative i am of your diligence in the process we've gone influence vetting here in the senate. i appreciate the more than 3,000 pages of supporting material you've offered as well as the countless hours you and your staff have offered to respond to questions from members of this

committee. let me be clear, you followed off of the an lickable law and followed off of the committee's long-standing standard. i want to go, in my first question to you, to tax cuts and jobs act, which the senator and i have already membered and you mentioned in your remarks. the statute on this new law is that it was a tax cut for the wealthy. i appreciate you, mr. bessent, noting that this will be a four-plus billion tax increase if we do not extend this law. and a point that i would remind all of my colleagues is that if that tax increase happens, it's not just going to be something that impacts the wealthy.

it is 2.6 trillion of it. the majority of it falls on people who make less -- $400,000 for a family with two taxpayers, under $400,000 per year. that's the number that president biden chose to say he wanted to protect it. 2.6 trillion of those tax cut hits those making less than $400,000. more over of it, massive amounts hit others, small businesses throughout the country. this is a tax increase on all americans. the majority of whom are in the lower and middle income categories. my question to you is, one of our pivotal tasks is to make sure that this tax increase does not happen. can you give us your perspective

on the impact that would occur in this country if he allowed this $4 trillion tax increase to happen? >> senator, thank you for this and thank you for the meetings over past few weeks. i've enjoyed working with your staff and this is the single most important economic issue of the day. this is pass/fail. that if we do not fix these tax cuts, if we do not renew and stepped, then we will be facing an economic calamity and, as always, with financial instability. that falls on the middle and working class people. we will see a gigantic middle class tax increase. we will see the child tax credit -- we will see the

deductions halved. so it will be, what we call in economics, it has the potential for a sudden stop. and as i said, traditionally with these sudden stops, it falls on working americans. >> thank you, and i would just say to you -- you may be aware of this but the tax foundation has indicated that if we do sustain these tax cuts and protect them from expiring and stop this tax increase that the extension of this policy would increase the growth of the g.d.p. in the united states by 1.1% over time. similarly, and i don't know how they came up with the same number but the national association of manufacturers indicates that if we don't extend this tax relief that there will be a 1.1% reduction in growth of jobs and

development in our economy. it seems to me that as we are talking about what to do for americana protecting america from a 1% reduction versus a 1% growth in g.d.p. is critical objective. could you just give a little bit of perspective? i know you just answered this in another context but can you give another perspective on those kinds of dynamics? i'm sorry, i'm going to try to keep to five minute and we only have about 15 second left of meanwhile. could you quickly respond? >> i would just say that we saw the power of these tax cuts in 2018, 2019, and going into january of 2020 before they were interrupted by covid and the great success that we had. >> thank you.

senator widen? >> thank you very much. i have four questions i'm going to ask and if we both can keep it brief, i think we can get to all of them. i'm going to start by talking about the future of direct file. this is the program that helps our people who choose it to save hundreds of dollars when they file their tax return. last year the i.r.s. launched it. it was enormously popular among taxpayers but, of course, the tax software giants and their big lucky just hate itth they want to shut it down. now, filing season starts january 27th so it opens in 10 days and millions of taxpayers around the country have already been notified that they are going to be eligible to use direct file this year. so i won't do this for every question but i'd really like a yes or no on this one.

will you commit to keeping direct file up and running if you're confirmed? >> i will commit that for this tax season, that direct file will be operative and the american taxpayers who choose to use it will, and if confirmed, i will consult and study the program and understand it better and make sure that it works to serve the i.r.s.'s three goals of collections, customer service, and privacy. >> i appreciate the answer. it means that taxpayers are going to save hundreds of dollars and will have a chance to see once again how popular it is with practically everybody except the tax prep software crowd. on to tariffs.

donald trump with no plan and no strategy says he's going to put across the board tariffs, blanket tariffs on all imported goods, which means that our workers and small businesses are going to get clobbered with additional taxes on practically everything they buy from other countries. my question here is who would pay these tariffs? americans or foreign countries? >> so this, senator wyden, just to understand so i can frame the answer correctly. do you believe that these tariffs are a consumption tax increase? >> i believe these tariffs -- you can call it whatever you want in terms of trying to gussy it up. they're going to be paid for by our workers and small businesses and all through the campaign we heard they weren't, foreign countries were going to pay it. i think that's baloney.

so, your response? >> yes, senator, i would expectfully disagree and the history of tariffs and tariff theory, on the maltariff theory does not support a what you're saying. traditionically, we see that the current for if we were to use a number that's been thrown around in the press of 10% then traditionally the currency appreciate by 4% so the 10% is not passed through and then we have various elasticities, consumer preferences may change and finally, foreign manufacturers, especially china, which is trying to export their way out of their current economic malaise, will continue cutting prices to maintain market share. >> that's an academic view of it but what i know is the history

of this is it clobbers people of modest means. they're the people who are going to get hit and all through the campaign there was a big show that it was going to be paid for by foreigners. two over questions i want to get in and i already made it clear and you and i talked about this. i'm for a tax code that gives everybody the opportunity to get ahead. i walk talked about my friend bill bradley. we've been working on this for years. do you believe the tax codes should treat wages differently than it treats wealth? >> any tax system creates advantages ask creates detorsions. senator, it is a decision that was made when the tax codes were written and so every tax codes

involves the tradeoffs and distortions in favor of other gains. >> it sounds to me like you do believe that it's fine to treat wealth more favorably. i couldn't disagree more. the idea that a dollar earned by a hen fund manager has my value than a dollar earned by a teacher or a factory worker, i think it's a disconnect with the american people. one last question, that is about the legislation that was written in this room that was the biggest on energy our history. we said it's a broken down mess and we basically said we're going to have a tax neutral system. now there's a big effort in the trump administration to reverse it. i believe it's going to be bad

for the economy but damn good for china. are you going to be on the side of people who want to unravel this? >> senator wyden, just so we can frame this for everyone in room. china will build 100 new coal plants this year. there's not a clean energy race. there is an energy race. china will build 10 nuclear plants this year. that is not solar. i am in favor of more nuclear plants and i would note that the i.r.a. as scored by the c.b.o. is wildly out of control in terms of spending on the upside. >> first of all, clean energy package does protect nuke lash because members on both sides of the aisle in this room wanted it to be this way. but about fossils, the united states has achieve a greater level of energy security than in

generations. oil and gas productions is the at record highs and it's not just that but it's about clean energy and i'm very troubled by your position denying that we're in an arms rails with china on clean energy. >> we do need to move on. i told senator wyden he could have those four questions but i want to remind everybody else we have a five-minute time little bit. senator grassley? >> mr. bessent, congratulations. i wanted to tart out with something you and i talked about in our office and you remember that tongue and cheek thing i said to you that you were going to be asked by all the chairmen will you answer all of our letters and i said maybe you better say maybe because most people don't keep that promise. so if i write you a letter on oversight responsibility, i'd

appreciate it if you'd answer. now to my first question. my democrat colleagues believe the only solution to our unsustainable debt and deficit is higher tax rates and that end up being on job creators and families alike. however, history proves that high tax rates fail to raise significant revenues. taxpayers, workers and investors are smarter than that. ford, they're smarter than we in congress that thinks that at one time a 93% marginal tax rate would bring in more revenue than a 70% tax rate or a 50% tax rate or a 30% tax rate or a 40 pbs takes rate and so on but as you can see from this cart, congress isn't too smart because the taxpayers decide how much money

they're going to bring into the federal treasury. on the other side, the ledger, federal spending is at levels we've never seep outside of war and recession and still growing so i'm making a statement to you be you if you'd like to comment on whether we have a fiscal balance primarily or a spending problem rather than a revenue problem. >> senator, i enjoyed visiting you in your office and will remind you that when we were talking about the american agriculture that i may be the first treasury secretary nominee in a long time who knows what a section is. 642 acres. and am involved in the farming business and yes, we do not have a revenue problem in the united states of america, we have a spending problem that historically for the past 40 or 50 years, revenues, federal

government revenues, have averaged about 17 to 17.5% of g.d.p. and spending has been slightly over that, leading us to a 3.5% wasn't deficit, which is manageable because we have roughly 3.8% nominal growth. 1.8% real growth, 2% inflation. today, as you stated and to be clear, this is one of the things that got me out from behind my desk and my quiet life in this campaign was the thought that this spending is out of control. we were spending about 24 or 25% of g.d.t. so, as you said, 6.8 to 7% deficit. we have never seen this before when it is not a recession or not a war and i am concerned because several times the treasury of the united states has been called upon to save the

nation. whether it's the civil war, the great aggression, world war ii or the recent covid epidemic, treasury, along with full government and congress, has used its borrowing capacity to save the union, to save the world and to save the american people and what we currently have now, we would be hard pressed to do the same. >> my last question is one i ask a lot of people who come from treasury. while i oppose tax hikes on individuals, families, and small businesses, i've long companied sensible policies geared towards shutting down tax loopholes and providing tools to i.r.s. to detect cheats. primary example is my

legislation that i authored in 2006, the i.r.s. whistle blower law has brought $6 billion back into the federal treasury. this program could raise billions more if i.r.s. would use it to its full potential so i hope i can count on you if confirmed, and i think you'll be confirmed to work on this whistle blower program and work to i'm full potential. >> senator grassley, we're in complete alignment on this program. >> thank you. next would be senator cornyn. >> thank you, mr. chairman. mr. bessent, welcome to washington, d.c. you're getting a taste of what it's like here. which is an out of body experience for most people who are not acquainted with it. i happen to represent a state that has the eighth largest economy in the world.

we think we understand the formula for economic growth and prosperity and opportunity, which are low taxes, a reasonable and modest regulatory footprint and opportunities for people to prosper and by prospering, invest and create opportunities for other people to pursue their dreams. we think there's a lot washington can learn from that formula and it sounds to me like you agree. one of the strange experiences i've had here is that so many of our colleagues, principally on the other side, think that the munn that you earn is not actually yours, it's the federal government's and you just get to keep a little bit of it. conversely i believe that the money people earn is theirs and they have the responsibility to pay taxes but as you point out, a large tax burden has a way to

have depressing the economy and reducing the standard of living so i'm grateful for your nomination ask i think you are exactly the time of individual to -- that needs to serve in this important position and i support your nomination whole heartedly. let me ask you if the short time i have, one sort of obscure question and another one that we discussed in our office. as you know, the market for u.s. freshries is the largest market in the world at $28 trillion and is critical to the financial stability of the united states. there's actually a proposal for an entity to clear u.s. treasury futures at the london clearinghouse, which is overseen by the bank of england. some argue that the bank of england would have a control over rate, heaven forbid, a default scenario in this critical market instead of the u.s. is this a concern to you?

>> senator cornyn, i enjoyed visiting in your office and i would note that while texas has more -- due to good economic policy, south carolina has more as a percent of the population, also driven by our wonderful governor henry mcmaster. >> i'm still going to vote for your nomination. we have 1600 people a day in texas. but go ahead. >> everything is bigger in texas, sir. you raised a very important question and one that i will investigate further. i was unaware in the the past few days of this with the new exchange. what i can tell you is, as a student, professor of economic history, that it is important for the u.s. -- for u.s.

treasuries, for us to be able to resolve any stress issues in the market in the u.s. we saw during the lehman brothers bankruptcy that many of the problems emanated from the u.k. subsidiary so this is something that -- thank you for bringing this to my attention and i am -- my inclination is that the resolution authority must lie here in the u.s. but i will get back to you in writing with an answer on this if confirmed. >> thank you. you appropriately mentioned china as one of our biggest challenges and while i believe in free and fair trade, we know that some countries, aprilly the p.r. fortunate c., chinese communist party don't play by the rules. over the years, by some estimates, u.s. investments in chinese companies have totaled

$2.3 trillion in market value. that was at the end of 2020. that included 1 billion dollars. these are american companies investing in china. 54 billion in military companies and 221 billion in artificial intelligence so it's pretty clear to me that u.s. investments have fueled china's economic growth, which has allowed them not only an increased standard of living, which is great for the chinese people but problemmatically it's also allowed them to modernize the military and now then the peace in the indo-pacific and beyond. we've discussed an introduced bill that would require transparency of american companies investing in china and, of course, the entity that would receive reports from american expense that do that would be treasury.

what's your view about investment transparency requirement? >> senator cornyn, i believe that, as we discussed in your office, this is a very important issue. that the -- we can -- the chinese economy is the most imbalanced, unbalanced economy in the history of the world. they're using their surpluses to fund their military machine. in china, and i'm not going to try the mandarin pronunciation but there is a phrase that is two words -- military industrial. and military always comes first so we should understand that and that we should have a very rigorous screening process for, as you identified, anything they could be used in a.i., in quantum computing, in

surveillance, in chips that the u.s. has the lead and we must make sure that we maintain it -- >> you are listening to the confirmation hearing of scott bessent, taking questions from republican senator john cornyn of texas. bessent has already said about also begin to china, ai, these are tariffs, and supply chains. you can continue to listen to this under terminal. but in other news, we must get to defense tech startup anduril having selected ohio is the location of a new manufacturing facility that will produce tens of thousands of autonomous systems and weapons annually. all this part of a plan to become a key provider of drones and technology for the u.s. military. let's bring in ed ludlow, who is in rather cold ohio.

ed: thank you, caroline. at full capacity, arsenal 1 will be five main square feet and create 4000 jobs over 10 years, and anduril is putting a billion dollars of its own cash into the project. who better to discuss that with than the chief technology officer? >> thanks for having me. ed: it's incredibly aggressive commit the timely to manufacture the first stage and start production mid-2026. >> it has to be discussed because we don't have time for business as usual. the types of threats that united states is facing, our allies are facing him the fact that we are city run out of ammunition within the first eight days of a conflict with china -- ed: but why ohio? palmer: there with the state

that give us the best shot of that timeline. we are hiring 4000 people here, a lot more jobs in an indirect capacity. it's the largest single job creation event in ohio history. it's a state we have the workforce, a million people capable of working within a 40 5-minute drive, helping to train people so they can work with you. our customer in the form of the united states air force has a huge presence here. really all the stars aligned to make ohio a great place for us to do it and to do it fast. speaking candidly, there are some states that are really good at pushing you out and slowing you down and there are others that are great at pulling you in and speeding you up. ed: was california at any point likely candidate, and if not,

why? palmer: there was zero chance of arsenal 1 being located in california. the high cost of living, the high energy cost, in some cases the unreliability of the energy systems, the unreliability of the state politics and the worry on the regulatory side and the reality is california has enough money and enough successful companies that they don't have to worry about a company like mine. the jobs we are bringing to ohio, they are material and something for the state really cares about. it doesn't hurt that one of our cofounders is a native born ohioan. i'm not saying that is why we made a final decision, but it major ohio was capitalist at the beginning. ed: he has nothing to do with vice president-elect jd vance? palmer: this decision is a lot longer than that. we are finally able to talk about it today. you saw the renders, the site plans.

we raised $1.5 billion round of financing last year to build this facility. ed: one of the questions from our audience was about the jobs. 4000 over 10 years. there must be a mix of those originating from ohio, but you must be trying to attract talent out of state to move here. i know you will be spending a lot of time here as well. palmer: i will be buying up house here. and blessed with financial success for my first company so i don't have to work out of hotel room when i'm out here. yes, we are in a higher a lot of native ohioans. we will have a lot of people who are imports adding to the economy look at our headquarters in california, 80% imports. 80% of our employees are coming into california, and we are going to bring a lot of people here as well. maybe not 80%, but there is a lot of people moving to the area and economically building it up. ed: the supply chain in ohio is interesting.

you will have use oft wo runways, rickenbacker airport. my understanding -- take, for example, the theory behind us. in some cases you will be able to take off from the runway a few feet from where we are sitting and deliver the technology director your customer. explain. palmer: directed to customer or directly to the action? this is our cca, and autonomous loyal wingman fighter jet that can fight alongside f-35s and other fighters that the united states and our allies use. we can manufacture these aircraft at scale. and then we can fly them directly to the customer or in some cases to the theater. that is what we did during world war ii. that is what we plan on doing again. ed: ohio is quite busy. intel has a fab nearby.

do you see that as competition for talent or value add? palmer: it's both. value-added, and i'm going to hire some of their people and they will hire some of our people. what you want to do is make the area more attractive in general. if we were the only company that was in the area commit would be harder to get really world-class people to want to stay in the area. we are the only game in town. when they know it is a healthy ecosystem of career choices, it is a lot easier to get people to come. ed: when i spoke to ohio governor mike dewine earlier, i asked him what was the single biggest factor that gave him conviction about you meeting your timelines, i just many factoring, b -- not just manufacturing, but your commitment to the state. every industrial technology company i have covered, no matter how many billions of dollars they raised from private sources, private growth equity,

have never met their manufacturing timelines. slippage get the plandemic has been effective. he said that factor was you and your colleagues. what can you tell me about how the team guarantees the timeline? palmer: we don't have time for business as usual. people are predicting there is going to be a window of opportunity for x ini china that opens in 2027. you need to be ready for potential great power conflict with china in train 27 and for a few years after that. there is no other option. the reason we raised that round, the reason we are accelerating this process, the reason we are investing in building this factory ahead of the customer to do it is we believe in the timeline. it is critical that we hit it.

ed: are you getting financial incentives from the state of ohio? palmer: absolutely. they gave us a great incentive package and that was part of our decision. ed: what is its composition? palmer: i will let somebody else tackle it -- i can tell you it is in the hundreds of millions vs. the billions. ed: $2.1 billion? palmer: they did a better job negotiating get me.-- than me. i'm glad intel is here, they are a great partner. they are making semiconductors that are competitive with the things being done in other countries. it's critical for our products in the united states. ed: palmer, it is important to have extended time to talk about arsenal i. one of the most common questions i get from the audience even if they are familiar is what does it actually do. they might know you as weapons manufacturer, or if they are a bit more researched autonomous defense systems.

can we talk about what it is going to manufacture and whether technology will be sold and deployed? palmer: we look at ourselves as a defense product company. we decided what to build, how to build, we invest our own money into making that happen, we sell products to the customer. we work hand-in-hand with customers through the process. it is not like i can build a batmobile and sell it to them because it is cool. i'm sorry, what was the second part of the question? ed: what specifically -- palmer: what specifically are we building? they are driven by what our customers need. we are building our economist fighter jets. you see all three of the different barracuda cruise missile families. autonomous cruise missiles. we're going to be building a lot of our isr drones, a lot of our mobile command and control systems. we will be building this place

here. -- building combat displays here. ed: the first phase of the facility is about five acres. what is the process look like building out what you call hyper scale defense or weapons manufacturing? palmer: building this place up in a way that only a madman would. our co has been the hero of the day going from a minimal footprint to 90 football fields in a very short period of time. it wouldn't be possible if we didn't have close cooperation with local authorities, on the permitting side, power and utility side, logistics. rail logistics, air logistics, road logistics, moving things in and out of the facility quickly. if everybody wasn't on board, this timeline would be unreasonable. i will note, we have

competitors who note we will not have these timelines, that we are madmen.anyone can be wrong, but i would love to do a follow-up piece in 24 months and see if we are mad men or not. ed: you and i will sit down again but in an operational facility. palmer: we will have fighter jets off the line. ed: the other question direct from the audience is how they as retail investors can participate in this. palmer: the united states government has taken a very un-american position in saying you need to be generally an accredited investor to invest in companies like anduril. i think that is totally bogus and anti-american, especially the only thing being an accredited investor means is you have money already. a lot of people have money and you would never say they are credited to do anything and vice versa. that said, we are on a path to be a publicly traded company. i want us to be accessible to the american public.

i will take an ideological stand there. it is good for us and good for our customer. as for when that happens, we don't need the ipo. we are running a lot of contracts and getting quite a bit of money. ed: double last year to about a billion dollars? palmer: that's the rumor. things are doing really well. we don't have to ipo to raise money to keep the company going. i want to do it at a time when the markets are favorable. i want to improve some of the big bets. i don't want to ipo when people are saying we are madman and say we are doing the impossible. all we have to do is that we can do it again. ed: you will be doing business with somebody new in the department of defense for some president trump's pick is mr. hegseth. he was not one of the names you

had in your head. palmer: you asked me about it and i said i heard a lot of the names coming out and i was a big fan of all of them. he was not one of the names i heard rattling around. ed: look at his cv, he doesn't have experience running an organization of that size. you want change and improvement in how america does business with the private sector and defense. what will your approach potentially with mr. hegseth b?/ palmer: there is a lot of credentialism levied against him that is totally unfair, and i empathize with him alive. i started oculus when i was 19 years old when i was in a camper trailer. i didn't have experience running that company. i'd absently no business running this company. people made the exact some criticism. what the hell does palmer know about the military? he is not qualified. the leap from where people say

his credentials are is a much smaller leap than the best leaps i've seen people make in my career. i'm never going to be the guy to say, "oh, i don't think he's qualified." he's way more qualified than i've ever been to do any job i've ever done. god bless him. i think he is a great pick. i read his book "the war on warriors," so i was familiar with him, although not his name being in the arena. i think he is what is been bird as -- he is going to kick ass. ed: that's talk about president elected trump. you think changes needed in the military-industrial complex what changes are needed to allow for arsenal want to be a success? palmer: i think it's going to be a success, the amount of change we have already had in the system will allow that. i don't think we need radical changes in the system for anduril to do well. but for our country to do well, for us to do a national secured apparatus we need to move quickly and take targeted risks

and get more companies into defense many factoring, and that includes companies that are not currently defense companies, getting big tech in, little tech in, a lot of our industrial providers in. that is how we won world war ii, leveraging the whole of the nation. that is the only way we are going to win in the future as well. i think the people being brought in have that mindset. we need to spend less, do more, do it with the right things. ed: palmer luckey, chief technology officer in the columbus, ohio, area, the future site of arsenal one. caroline: ed ludlow, a conversation in ohio as it picks that to be the destination for arsenal one. great interview. just to go back over the key takeaways of what palmer has been saying, the commitment to july 2026 when the autonomous weapons will come into bear. a five-acre site in columbus,

ohio. talking about what the administration means were defense technology. we can talk about what it looks like, feels like, because we have a confirmation hearing happening, scott bessent for the post of secretary of the treasury. it is underway, as a concurrent lease s -- as you can currently see, mark warner, democratic senator, questioning scott bessent. sen. warner: we talked about this in my office and i don't want to -- one of the things i was happy to hear, i feel very strongly that we cannot reward vladimir putin's aggressive, outrageous behavior in ukraine. and i think the ukrainians have performed remarkably. they have manpower issues, i've seen this from the intel side on a daily basis. one of the areas that i think we have not done as well, and

candidly, the sanctions regime i don't think was as effective as it should have been, i think the biden administration waited too late to put these additional sanctions on oil and tankers. th abilitye for russia to ritual. i hope president trump can settle this, hallelujah. the world would be better off. but one of the things we discussed in my office with the potential to increase the sanctions regime as a way to leverage that would you care to talk for a moment about that again? mr. bessent: yes, senator warner. i believe that the sanctions regime, especially -- first of all, i would say in my adult life that the tragedy going on in ukraine is one of the greatest tragedies of my adult life, and ending that as soon as

possible, and he rolled the treasury can play in that if confirmed i would like to do. as we discussed, i believe the sanctions were not fulsome enough. i believe that -- i believe that the previous administration was worried about raising u.s. energy prices during an election season. and i am perplexed to see that national security adviser sullivan on his way out the door is raising the sanctions level on russian oil companies, and indeed oil prices in the u.s. are up about 9%. what was good for that administration is being foisted on us. but having gone from low-level

sanctions to mid-level, if any officials in the russian federation are watching this confirmation hearing, they should know that if i am confirmed and if president trump requests, as part of his strategy to end the korean -- the ukraine war, i will be 100% on board with taking sanctions up especially on russian oil majors to levels that would bring the russian federation to the table. sen. warner: let me get 30 seconds -- thank you for that because it is important that we don't take these tools out of the toolkit. we can litigate what the pastor administration did and when they did it, but increasing pressure on putin to bring about a resolution, i very much appreciate your willingness, and i hope you will be an advocate for keeping those sanctions on and advancing them even further. chair crapo: thank you, senator

warner. senator lankford. sen. lankfrod: mr. bessent, good to see you again. you said earlier that after the tax cuts and jobs act of 2017, we have had several years to see what happens, and now i believe the statistic you gave is the top 50% of earners in america pay 98% of the taxes. did i hear that correctly? i've heard over and over again that it is only the wealthy, only the big companies that get it. i would encourage every oklahoma company that is a small business to ask their cpa this year when they are filing their taxes what if the tax cuts and jobs acts expires next year? what will my taxes be next year? and have small business owners ask the question of their cpa. there will be quite surprised to say this only big companies and wealthy people, that every small business will find out it is them as well. same thing on the child tax

credit. it gets cut in half the child tax credit. all the inversions under the obama administration where american companies were being bought out by foreign entities, that is switched an american companies are buying those jobs and the companies are coming here. the one challenge we have had on this committee has been a conversation with janet yellen about pillar 2. it started four years ago, three years ago, where the conversation was about we don't need congress to act on this week feel like we can do it unilaterally and change america's tax policy for all businesses in america. they have shifted to say we will come back to you at some point. ideal has been negotiated that literally helps european countries and hurts the united states on this. and they negotiated a deal that exempts china from being affected by this at all. my question to you is are you

going to engage on this issue of pillar to come and have this committee involved in writing taxes, which seems to be consistent with the constitution, and then what is your message to other countries if they try to implement it on american businesses? mr. bessent: thank you, senator. as we discussed in your office, senator lankford, i believe that any especially european company, but any country that in the next few days before president trump takes office is intent on implementing pillar two full find it a grave mistake, that the taxation of u.s. companies is a sovereign issue and that authority lies with this congress, and i will respect that, i will work with you to undo what i think has been a terrible policy. sen. lankford: which i would agree and many members of

this committee agreed that not only did they go around congress, violating the constitution, but deliberately hurt american companies. i think it is terrible, it truly was america last policy. you talked a lot about energy production. in oklahoma, we are unashamedly all of the above and all below energy. we have more wind and hydro-production in my state than any other state on this dais, but we also use oil and gas. we will produce all the energy are state needs. one of the issues that is a business issue for small or large businesses that i have been fighting for is a stable bonus depreciation amount. this is not about the type of energy or the type of business, even. if you are actually investing in your company and trying to grow your company, you wouldn't know what the bonus depreciation -- this would help pipeline productions, but it would also

have a pet shop and hair salon and restaurant as much as well. thoughts on bonus depreciation and a stable rate for that? mr. bessent: senator langford, you are referring to the 100% -- sen. lankford: what has been in the past, but quite frankly, a stable rate, period. right now we have a diminishing rate that is unpredictable. mr. bessent: i think increasing the after-tax return on capital for u.s. companies can especially small business, is one of the greatest forms of job creation that we could see. to go back to your point on energy production, we have for much here today saying we have a record amount of energy production, and we know that is a canard. we are barely above where we were in 2020, and if we were to look at the department projections for 2024 and 20 johnny five, we are well below those. the past four years we have seen

u.s. reduction constrained and part of a full some sanctions program would mean we need more energy production in the u.s. to make up for the loss of sanctioned russian oil to protect the u.s. consumer. sen. lankford: which is american jobs, american income, when the things we have to deal with, the intangible drilling costs punishment put on the independent oil and gas companies in my state that rise up the cost for consumers as well. that is another issue the committee needs to take on. chair crapo: senator hassan. sen. hassan: thank you, mr. chairman, and congratulations on your position. i look forward to working with you and our colleagues on the committee. thank you, mr. bessent, for being here. congratulations and thank you for your willingness to serve and welcome to your husband and children as well. i appreciate you eating with me in the process and sharing your priorities at treasury if you are confirmed. i want to follow-up on those

topics today. i also want to associate myself with the comments of my colleague senator bennet and senator warner. i believe we need to cut taxes for working people and we need to make sure the wealthiest pay their fair share. with regard to senator warner's comments on sanctions, you mentioned if a vladimir putin is watching this hearing, he is not the only one watching this hearing. china is watching this hearing. we have talked about the importance of making sure we are not only competitive, but outperforming china for economic purposes as well as for national security reasons. and as important as a resolution in ukraine is, history tells us that appeasing tyrants at the expense of freedom fighters never worked. it is critically important not only for the ukrainian people and the freedom of all of us, but it is important because china and north korea are also watching what we do and watching

this hearing and how we will go forward imposing sanctions. to turn to some of the topics we discussed when we met in my office, the research and develop a tax deduction was one of them. it is critical to helping us outcompete countries like china. currently china provides a 200% super deduction for r&d while american businesses can only immediately deduct 10% for r&d. i worked with senator young on a bipartisan effort to restore the full and immediate r&d deduction . do you support restoring the full and immediate r&d deduction? we work with me and my colleagues to get this across the finish line in congress? mr. bessent: senator, i enjoyed the meeting in your office. i am not fully versed in this, but my inclination is that this is something i would support, and i will get back to you if confirmed very quickly on it and will make a priority, make it a priority. sen. hassan: do you agree to

it is an important tool for american committees to improve competitiveness? mr. bessent: yes, senator. sen. hassan: thank you. one of my other parties is working on a bipartisan basis to lower-costs for families. under president-elect trump's policies, do you believe prices for families will go up or down? mr. bessent: i believe that inflation will be a much closer to the federal reserve's target of 2%, and i believe that what we have seen over the past few years is 't'hat-- is that the bottom to income quintiles have a very different basket of goods and services. there are two ways, we can either lower-costs or can get real wages. i hope we are able to do both. sen. hassan: you believe that president trump's policies will further increase wages and lower inflation? mr. bessent: i believe they will increase real wages and lower

inflation closer to the federal reserve's 2% target, as it did via president trump's first administration. sen. hassan: are there specific policies proposed by the president elect that will increase prices for families? mr. bessent: nothing i can immediately think of. sen. hassan: so that is no. if the president-elect were to propose a policy that you believe would increase prices, would you advise against it? mr. bessent: i would speak to president trump about it. it is his decision. and i believe that we think that if we look back, that it is a complete composite return. in terms of aggregate inflation numbers, i think it is very difficult -- sen. hassan: well, i have limited time, so if you believe that a policy that is proposed by president trump would increase prices, would you

advise him against doing it? yes or no? mr. bessent: i can't answer that question because it is a hypothetical. sen. hassan: let's move on -- when we met prior to the hearing, you told me that president biden was responsible for increased prices over the past four years, something we can litigate, but i don't want to write here. by the same token i assume you would agree that if prices increase the next four years, president-elect trump would be responsible. mr. bessent: i think there could be a variety of reasons. i think that it could be -- we will see the policies of the federal reserve, the spending policies. congress sets spending policies. sen. hassan: look, i'm going to cut to the chase because i'm out of time, but at the end of the day, what you are articulate is a double standard, and it is disappointing to me. thank you, mr. chair. chair crapo: thank you. senator daines. sen. daines: i