Treasury Secretary Jack Lew spoke with Bloomberg Television’s Tom Keene at the World Economic Forum in Davos today and said he’s growing confident Congress will overhaul the nation’s immigration system and invest in infrastructure this year, “We have policy differences and those policy differences are legitimate and you have to work your way through them. I’m modestly optimistic that Congress will now want to get things done, whether it’s infrastructure or immigration reform, on the model of what they did on the budget.”
Jack Lew: U.S. Economy Has `Tail Winds’ This Year
Jack Lew’s Full transcript below
TOM KEENE, BLOOMBERG NEWS: He is the 76th secretary of treasury of the United States of America. They usually make a trek to Davos. What’s interesting this year is not only Secretary Lew with us, but Secretary Kerry in attendance, as well. In my time in Davos, I think it’s wonderful to have both of our senior cabinet officers here. How unusual is that?
Jack Lew, U.S. TREASURY SECRETARY: You know, I haven’t looked back at the records. I know it’s pretty common for treasury secretaries to come. I think that it’s unusual that the secretary of state is at meetings right down the road, and it’s an opportunity to – to have both of us here, which is a good thing.
KEENE: Davos greets a global economy somewhat struggling, some questions about China growth, emerging market political and economic tensions. I believe the locomotive is your United States of America. How are we doing?
Jack Lew: You know, I think the U.S. economy is doing much better. We ended the year strong. We started the year strong. I think as opposed to last year, when we had real headwinds from budget cuts and other fiscal policies, we this year have tailwinds, with kind of good fundamental economic core growth in a broad range of areas.
You know, the challenge we have is to make sure we can keep that going and that we certainly avoid having any of the kind of self-inflicted wounds that we saw last year, like the government shutdown and the fight over the debt limit.
KEENE: I was –
Jack Lew: I think the promising sign was Congress reaching an agreement on a two-year budget, then passing appropriation bills.
KEENE: Yes.
Jack Lew: I’m hopeful that we can – we can get through these next few months and show that there’s a year that won’t have that kind of character.
KEENE: Let’s get to the promising signs at the moment. There is this debt ceiling debate. I was talking with my colleague, Peter Cook, in Washington who noted selected Democrats are having trouble with the calendar, some thinking it is a May date. You’re focused on a Friday early in February. How important is that debate? And are you speaking to Republican leadership about the urgency of February 7th?
Jack Lew: I’ve spoken to leaders on both sides of the aisle in both houses. I think that, you know, as we understand the date, which is informed by the information that we gather day-to-day, in terms of flows of revenue and flows of spending, there’s really no question but that the date is – is much sooner.
I’m not sure where that – the misunderstandings come from. There have been estimates that were unofficial that don’t have the same quality as the projections we look at.
KEENE: I would respectfully suggest that a lot of Americans don’t understand your path. I want to get to Joe Moakley and Tip O’Neill in a moment, but you have real budget, real measurement experience. Does Washington lean forward a little bit more when Jack Lew says, “This is the money coming in,” because of your OMB experience?
Jack Lew: You know, I hope I have built up over the last three-and-a-half decades a certain amount of credibility. You know, I try to be straight, whether it’s good or bad news. You know, this is just a question of counting. And the reality is, Congress passed a law saying the debt limit expires on February 7th. We have very limited flexibility to use what are known as extraordinary measures. Given the time of year, they’re much more limited than they would be at a different time of year. Simple explanation, when people file for tax returns, a lot of money goes out. It’s not until quite a bit later that money starts coming in, when people file with the checks.
And we don’t have months of room after February 7th. You know, our best estimate is late February. If it’s volatile, it could be off by a few days, but it’s not off by a large amount.
KEENE: You have a unique heritage in Washington. You’re awfully young to have worked for Joe Moakley of Massachusetts, a legendary congressman, and then the special treat of, whether Republican or Democrat, of working for Tip O’Neill. Are we anywhere near the collegiality of that time, as we see this new benevolence on Capitol Hill?
Jack Lew: You know, I – I think it would be a good thing if we could go back to the days of when you had differences, but after 5:00, everyone could be friends, even if they had differences. I think you’re seeing some return to that. There’s some return to regular order by Congress passing a budget. I think there’s a ways to go to get back to where we were in the 1970s and 1980s.
But I will remind you that, in the 1980s, we thought it was the most partisan time, ’70s and ’80s, the most partisan times ever, ’90s, the most partisan times ever, so I think there’s a tendency to look back nostalgically and – and it wasn’t as benevolent a time as – there were personal relationships, though, that could help to bridge gaps.
The truth is, we have policy differences. And those policy differences are legitimate, and you have to work your way through them. It means you can’t necessarily do everything that you might want to do, but you find the areas where you can work together and you move the public’s business forward. I hope we’re getting back to that. I’m modestly optimistic that Congress will now want to get things done, whether it’s infrastructure or immigration reform, on the model of what we did – what they did on the budget.
KEENE: Let me rip up the script here. Why can’t we have railroads as nice as the Swiss railroads? I think they’re beautiful. Why can’t America have an OMB director or a chief of staff at the White House or a secretary of Treasury say, “We need to do infrastructure”?
Jack Lew: Well, we are saying we need to do infrastructure. You know, we’ve been pursuing an agenda for the last five years that included high-speed rail. So it’s very much a part of what we’ve been trying to do. You know, traditionally infrastructure is something that you can get bipartisan agreement on.
KEENE: Right.
Jack Lew: It doesn’t have party lines on it. Everybody wants better roads. Everybody wants better airports. The challenge we have is – you know, we’ve had a debate that’s been dominated by differences over fiscal policy, but has made it very much more difficult to find agreement in other areas.
KEENE: Right.
Jack Lew: Hopefully, we’re now breaking through that a little bit and we can get back to working through the areas where we should be able to find agreement. We have a need to expand our transportation programs this year. We should do that.
KEENE: Well, within the fiscal policy, we’ve got original finance (ph) today, a floating-rate note, a variable interest rate note, first time in 17 years. Consensus from Bloomberg is experts suggesting a higher interest rate environment. Why are we issuing a floating-rate note if consensus says higher rates are in the future?
Jack Lew: Well, we’ve been working on this for some time. It’s a product that I think the market – there’s a niche in the market for. And, you know, we don’t try to time what we do based on where interest rates are moving (ph). We try to have the products out there that would maintain the deepest and most liquid markets in the world, which is what we have with the Treasury market, and I think it’s an innovative product that has been a very long time in development and it still has a little ways to go before it’s actually in effect.
KEENE: I would suggest any secretary of treasury will avoid speaking about individual companies at all costs, so let me just pick our average American citizen. Is Warren Buffett a systematically important individual? When we look at his company, there’s a discussion about this, isn’t there? It’s interesting thing. We think of JPMorgan or we think of Bank of America as systemically important.
Jack Lew: So I’m – we have a practice of not commenting on whether we are or are not looking at any specific company. But what I will tell you is the process of determining whether or not a company is systemically significant and whether it presents risks that require any action has been – we’ve now seen several cases of running through it where it’s been done in private, where the companies can make presentations and present material, and, you know, I think it stands us in good stead to honor that. So I’m not going to comment one way or the other –
(CROSSTALK)
KEENE: Let’s get something less controversial. Broncos or Seahawks?
(LAUGHTER)
Jack Lew: Now you’re talking real controversy. I’m a New York fan. What can I say?
KEENE: OK, very political of our secretary of treasury, Jack Lew. Thank you so much.
Jack Lew: Good to be with you.
