Squawk Pod: Treasury Secretary Scott Bessent on shutdown day 2 - 10/02/25 | Audio Only

Key Concepts

Government shutdown, Continuing Resolution (CR), Affordable Care Act (ACA) tax credits, Federal Reserve (Fed) Chair, Inflation, Trade negotiations with China, Soybean farmers, Charitable giving, Tax deductions, Donor-advised funds.

Government Shutdown and Political Blame Game

• Day Two of Shutdown: The government shutdown enters its second day with no votes expected. Previous attempts to fund the government failed.
• Delayed Jobs Data: The shutdown is delaying the release of Friday's jobs numbers, potentially adding uncertainty to the Federal Reserve's monetary policy outlook (S&P Global analysis).
• Federal Employees Affected: Approximately 750,000 federal employees are being furloughed (not laid off), and 150,000 federal employees who took buyouts are now off the payroll.
• Potential Off-Ramp: A bipartisan group of lawmakers is discussing extending Affordable Care Act (ACA) tax credits as a potential path forward, but a deal is not guaranteed.
• Political Pressure: The Trump administration is putting pressure on Democratic senators by canceling funding for infrastructure and green energy projects in their states. $18 billion of funding canceled for New York City infrastructure projects and $8 billion of dollars of funding canceled for green energy projects.
• Trust and Negotiations: The resolution depends on trust and discussions between senators, with Republicans needing five more Democrats to reopen the government.
• Schumer's Dilemma: Chuck Schumer faces a dilemma: losing control of his caucus or being blamed for the shutdown.
• Impact of Prolonged Shutdown: A prolonged shutdown will have a greater impact, including missed jobs data, economic data, and paychecks for federal employees and military personnel.
• Administration's Power: The administration has the power to implement layoffs, using the shutdown as an opportunity to reassess essential vs. non-essential roles.
• NASA Operations: NASA will continue to support planned operations of the International Space Station and satellite missions in the operations phase, with around 3,000 of NASA's 15,000 employees working unpaid during the shutdown.
• Shutdown Leverage: Both parties use shutdowns as leverage when in the minority, despite disliking them.

ADP Report and Labor Market Data

• ADP Report Revision: The ADP report underwent revisions to align with BLS data, potentially causing it to appear more negative.
• BLS Data: The BLS data includes both federal and private sector numbers and is considered a near census of all workers in the United States.
• QCEW Data: The QCEW data has a six-month lag, making it less timely than other data sources.

Treasury Secretary Scott Bessent Interview

• Clean CR: Secretary Bessent advocates for a clean Continuing Resolution (CR) and criticizes Democrats for demanding a $1.5 trillion increase in spending, which he argues would fuel inflation.
• Schumer's Poll Numbers: Bessent claims Chuck Schumer's poll numbers are driving the Democratic stance on the shutdown.
• Trump's Leadership: Bessent highlights President Trump's leadership in cutting prescription drug prices and reducing the deficit.
• Medicare/Medicaid Cuts: Bessent defends the spending cuts in the One Big Beautiful Bill, stating they are the largest in history and will not be reversed.
• Fed Chair Search: Bessent is interviewing 11 candidates for the next Fed Chair, with the first round of interviews expected to be completed by next week. He will present President Trump with three to five strong candidates.
• Argentina: Bessent defends providing a swap line to Argentina, arguing it is a strategic interest in the Western Hemisphere and prevents the creation of another failed state.
• China Trade: Bessent anticipates a breakthrough in trade negotiations with China, facilitated by the respect between President Trump and President Xi. The current trade agreement expires on November 10th.
• Soybean Farmers: Bessent assures support for soybean farmers affected by the trade dispute with China, with news expected on Tuesday.
• China's Role: Bessent suggests China could play a more responsible role in global affairs by helping to end the war in Ukraine and stopping the purchase of Iranian oil.

AOL Sale

• Yahoo Selling AOL: Yahoo, owned by Apollo Global Management, is in advanced talks to sell AOL to Italian app developer Bending Spoons for $1.4 billion. Apollo acquired a 90% stake in Yahoo from Verizon in 2021 for $5 billion.

Charitable Giving and Tax Changes

• Nonprofit Concerns: Nonprofits are facing financial challenges due to federal funding cuts and the government shutdown, increasing their reliance on private donors.
• Multi-Year Approach: Tax experts recommend a multi-year approach to charitable giving due to upcoming tax law changes in 2026.
• Itemized Deduction Floor: Starting in 2026, high earners will only be able to deduct charitable donations exceeding 0.5% of their adjusted gross income.
• Deduction Cap: Deductions for filers in the top 37% income tax bracket will be capped at 35%.
• Standard Deduction Change: Starting in 2026, single filers who don't itemize will get an above-the-line deduction on cash gifts of up to $1,000, and $2,000 for married couples filing jointly.
• Strategies for Maximizing Deductions: Strategies include bunching donations, giving appreciated stock, and using donor-advised funds.
• Donor-Advised Funds: Donor-advised funds allow individuals to make a contribution now, take the maximum deduction, and spread the donations out over several years.

Conclusion

The Squawk Pod episode covers a range of pressing issues, from the ongoing government shutdown and its potential economic consequences to the complexities of trade negotiations with China and the evolving landscape of charitable giving. The interview with Treasury Secretary Scott Bessent provides insights into the administration's perspective on these matters, while the discussion on tax changes highlights the importance of strategic financial planning for both individuals and nonprofits. The episode underscores the interconnectedness of political, economic, and social factors shaping the current environment.