Treasury Secretary Scott Bessent on Shutdown Day 2 10/2/25

0:00Bring in show music please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod, another day, no government open. This is different than other government shutdowns. They all rhyme, but they're not all the same. Our Emily Wilkins with the latest out of Washington's blame game. I think a lot of it is going to come down to trust. It's going to come down to discussions. It's going to come down to how comfortable senators feel. And the Treasury Secretary, Scott Bessent, weighs in. You know, when I look at Chuck Schumer and Akeem Jeffries straight out of Brooklyn, makes me glad that I left New York in 2020.

0:36Funding, vote counting, polling and politics. If they want to shut the government down, then there are ramifications. Also, the secretary is deep in the interview process for the next chair of the Federal Reserve. Can you give us a name? Oh, sure, Joe. Come a little closer. Plus, AOL in the headlines? and tax changes coming to charitable giving are Sharon Epperson with news you can use. Of course you want to give the most that you can to charity and not think about the tax deduction, but people want to know about that. It's Thursday, October 2nd, 2025. Squawk Pod begins right now. Stand Becky by in three, two, one.

1:20Cue, please. Good morning, everybody, and welcome to Squawk Box right here on CNBC. We're live from the Nasdaq market site in Times Square. I'm Becky Quick along with Joe Kernan. Andrew is off today. And, hey, we saw the first trading day of the fourth quarter of the year yesterday, and it's second first, same as the first. New highs across the board for all the major averages. Then if you take a look at what's been happening with the Treasury markets, you'll see that right now yields are a little lower. The 10-year is at 4.09%. The two-year is at 3.54%. Pressure on yields after we got that ADP report that showed the jobs picture may not be quite as rosy as had been anticipated.

1:58And we're not going to get a lot of other data. Did you understand the first day of the quarter, first day of the shutdown, both with the markets at new highs? We did have ADP on yesterday to talk about it. and Neely Richardson. Neela. What we do is what the BLS does with their survey data, which is annually we re-benchmark it to the truth. And in the United States, that truth comes from all the workers that are covered by employment insurance regulation by the states. The BLS serves as an aggregator to these employment numbers. They are basically a near census of all the workers in the United States with one caveat.

2:47Why don't we just look at the QCW and throw away ADP and VLS? Well, the problem with it is that it comes out with a six-month lag. It said it had to do with the recent revisions in the overall employment reports, and they had to go back and recalculate it. But almost like, not saying that don't pay attention to it, but there were factors that they were getting caught up on in those revisions that caused it to look more negative. because the rest of the day we talked about it like it was disastrous for the labor markets. She seemed to be saying that there were some extenuating. She said it's a slowdown, but not horrific.

3:24But there were extenuating factors. I still don't understand entirely. Why private, federal, federal. Why private, federal, federal. Why private, federal, federal. Right. The federal numbers, but there's some magic know-it-all number that everybody has to set their benchmarks back. Well, the BLS data includes both, so we know that. And they try and do private. So a portion of those revisions were huge again in the BLS. And then the person got fired, obviously. But they're getting caught up on taking into account those revisions with their data. So I'm not sure it was a horrible number. Nothing acted like it was a horrible number.

4:02No. Yields lower, though. Yeah, a little bit lower, but new highs. Government shutdown enters day two. No votes expected today. Also, no jobs data. Emily Wilkins joins us now with more. We're going to hear about furloughs or firings en masse at this point. I know we're getting a lot of infrastructure clawbacks in blue states. I don't know. Democrats, it's almost like the Trump administration wants to make Democrats pay for this. I mean, they're definitely ratcheting up the pressure on Democratic senators, Joe. And, you know, now that the shutdown, we do know now it is going to delay those Friday's job numbers after senators failed yesterday to get enough votes at their latest attempt to fund the government.

4:48As you mentioned, no votes today with the holiday. Next votes right now are scheduled to be Friday afternoon. So jobs numbers could be delayed until then, could be delayed until we see funding. And if there is an extended lack of data, that's going to add uncertainty to the Federal Reserve's monetary policy outlook. That's according to a new analysis from S &P Global. And as you mentioned, when it gets to job losses, remember, we've got roughly 750 ,000 federal employees that are being furloughed. That's furloughed, not laid off. But Vice President J.D. Vance said that layoffs are expected to begin in the next few days.

5:24We are going to have to lay some people off if the shutdown continues. We don't like that. We don't necessarily want to do it. But we're going to do what we have to to keep the American people's essential services continuing to run. in addition to any layoffs about 150 000 federal employees who took buyouts earlier in the year they're now officially off the payroll as of yesterday it was the end of the fiscal year it was the end of their role so you have to factor that in as well to any layoffs that we do hear about and of course everyone's looking for the potential off-ramp here one of them is that there is a bipartisan group of lawmakers they are discussing a potential path forward on extending some of those Affordable Care Act tax credits.

6:04But so far, it's not clear that a deal is going to come together. And Joe, as you mentioned, the pressure is only ramping up. You saw$18 billion of funding canceled for New York City infrastructure projects. You saw$8 billion of funding canceled for green energy projects, including hydrogen, all of it from states represented by Democratic senators. So the Trump administration really putting pressure on them to vote with Republicans for that stopgap measure they've been putting forward. Guys? And there are discussions between senators on both sides of the aisle. And I asked, well, who's close? And he said, well, there are discussions with certain senators.

6:46But he wouldn't tell me who the next moderate Democrats are moderate Republicans. But but it sounded like what they were discussing, Emily, was just the idea that they would find a way to continue to fund the government for the next seven weeks while they discuss the health care issues, which I thought that deal was already on the table. I wasn't even talking about whether they'd make some type of compromise. I'm talking about who's going to just finally say, I'm joining Fetterman and I'm joining Angus King. My guess is that it will come from that because it's part of the deal that's already on the table.

7:19Yeah, but there's too much pushback. They said, no way we're doing that. with the why should we spend a trillion dollars on a continuing resolution to fund subsidies for a program that just costs too much. It costs too much and it's raising the price. It's raising premiums for everyone. I mean, that's how health care works. If you subsidize it, everybody, all private employers are going to try and get people to move over to the subsidized. That's why we're in this mess right now. And I think there's. And that's really the interesting thing right now is the cost, right? Because if you look at everything Democrats are asking for, yes, it does total$1.5 trillion.

7:57But if you just look at extending these Affordable Care Act tax credits, if you were to do so just permanently, Congressional Budget Office estimates that that's about$350 billion over the next decade. And that's why you're seeing Republicans and Democrats say, look, we can do things like we can cap the amount of income or we can have people pay a minimum payment or we can limit those who are actually able to go ahead and take this tax credit. But of course, as you guys were just mentioning, all that takes time. They can't get to an agreement on that in a few days. That's a negotiation that could take weeks, could take months.

8:32And so I think that is kind of one of the things they're discussing. Is there a way to move forward where you keep the government funded? but at the same time know that you are making progress and that you will reach some sort of compromise, say, maybe by November 21st, which, of course, is when the stop that gap is going to go to, or even before the end of the year when these tax credits formally expire. That's what it's going to be. We promise it's not going to be done before. It's not going to be done before you get 60 votes to reopen the government. There's going to have to be some Democrats that say, OK, we trust you or there's something that that's solid enough where they think they're going to get.

9:14You think they'll get beyond just a promise to talk about it? You think they'll get a promise that we will do it if if you vote with us on the CR? I think a lot of it, Joe, is going to come down to trust. It's going to come down to discussions. It's going to come down to how comfortable senators feel. I mean, remember, Republicans at this point, they've got three Democrats who are voting with them. They only need five more to be able to reopen the government. And even yesterday, when these votes were happening on the floor, you saw that big bipartisan group of lawmakers that were all, I think, trying to talk about it, trying to get to a solution.

9:48Obviously, keeping a number of cards close to the chest as they negotiate. But it does seem like there is at least some movement there, because if these tax credits expire, that is going to impact people in Republican states as well as Democratic states when it comes to the cost of their health insurance. Well, can Schumer say, hey, I didn't acquiesce. I did my best for you. And will that if you get nothing, if you appease the left, if the other people end up folding and he says, hey, I did my best. These other guys, these other guys, you can't control your caucus. Which is more reputational damage for Schumer, that he loses the control of an additional five or that he says, hey, I held firm this time and you can't blame me for this.

10:34These other guys are rogues or other guys. I think it might be a no-win situation. That's a good question. I think it's also going to depend on what this agreement is, right? I mean, if Schumer can credibly go behind a podium, face a bunch of news cameras and say, look, this is what we got in exchange for reopening the government. And I feel confident this is going to address health insurance or whatever it winds up being that you could always spin something as a win. And I think then it's a question about what does that actually look like? And then, of course, what happens next? You actually wind up seeing an agreement seven weeks down the road or two, three months down the road.

11:11And so I think it's a lot of questions at this point as far as what, if anything, is going to come from these negotiations. And, you know, it could be something where they're not able to get to an agreement. And at that point, again, the pressure just keeps ratcheting up. We're missing jobs day. There's other economic data on the line. Soon we're going to have paychecks being missed for federal employees, for those in the military. I mean, every week that this shutdown goes on, the amount of impact is just going to go greater and greater. And then you wonder if the president overplays his hand in these permanent layoffs that we might get.

11:47That will that I mean, his his base would probably love more doge like cuts because they tank the economy and the jobs market might tank the economy and just people. I'm already seeing it. I think I think Jimmy Kimmel went on Stephen Colbert show. God, I can't believe I missed it. I thank God I recorded it. No, I didn't. And then talked about this the first time in history an administration has been cheering the loss of jobs in terms of if they do lay off a bunch of federal employees. But that could affect the midterms, too. Emily, if you go too far with this, it is a chance to do a lot of these things that the administration couldn't do under just Doge.

12:31But could they take that too far? I mean, the administration, it should be noted, I mean, they have the power to do these layoffs. It's not like the shutdown grants them any special ability to do this. I mean, this is something where the administration has decided to use this moment to kind of take a look at maybe who is considered essential versus non-essential. A lot of people would quibble with using that term there that, you know, some folks who are kept on or are furloughed are still doing very important work, as we see with the jobs data and other data from BLS. I think there's a huge question about how this plays out in the midterms.

13:04I mean, both sides have really gone into this making a bet that they're going to be the ones coming out looking better and the other side is going to be coming out looking worse. And we're just going to have to see how this thing ultimately plays out and what those poll numbers look like. Because it started with, yeah, we really want to be able to. It's going to be great. We're going to lay off all the permanently lay off all these government employees. But then you see J.D. Vance and others walking up. I know no one wants to do this, but, you know, this we've got other essential services while the government's closed.

13:34We've got to keep these open. So this is just a necessary thing that, you know, sort of walking back the zeal that it seems like they have for for being able to do this. Emily, thanks. This is different. This is different than other government shutdowns. There's more. I don't know. They all rhyme, but they're not all the same, except for the stock market never goes down. Right. NASA employees on the Artemis missions with SpaceX and Blue Origin will keep working through the shutdown. Yeah, hard not to when you're there and you have people in space. CNBC has learned around 3 ,000 of NASA's 15 ,000 employees will work unpaid during the shutdown furlough, but they will receive back pay when the government reopens.

14:18NASA will continue to support planned operations of the International Space Station. Good idea. As well as any satellite mission that is in the operations phase at this point. But again, this is part of the problem with shutdowns. Planned chaos for forcing people to work because you've got to be there. You've got to show up for these jobs, but you're not going to get paid. Don't worry. We'll take care of you later, they say. Yeah. Meantime, good luck paying your mortgage. Right. It's, yeah. Neither side like shutdowns, but they both use it. I've never been a fan. I mean, it's a ridiculous idea.

14:50You've already agreed to spend this money. You've already basically, it's not paying your credit card. Maybe we do the Ron Johnson thing. Get rid of the idea of government shutdowns. Get rid of shutdowns. There's a way to do it. It's not that hard. And he says we're close. We almost have enough people to do it. Neither side wants to give up the leverage because they see it as their one leverage point when they're in the minority. Neither side. Yeah. And both are like, oh, we have a shutdown coming up. Whomever is out of power. Right. Whoever the minority party is. Right. To keep it. And they know that even if they're in the majority now, they will eventually be in the minority.

15:22Yeah. And Yahoo could be close to selling AOL. And no, this is not a flashback to the dot-com era 25 years ago. Reuters is reporting that Yahoo, which is owned by private equity giant Apollo Global Management, is in advanced talks to sell AOL to Italian app developer Bending Spoons for$1.4 billion. dollars. Both Bending Spoons and Apollo have declined to comment on this. Apollo acquired a 90 % stake in Yahoo from Verizon in 2021 for$5 billion. You've got mail. Time Warner. Time Warner. Steve Case got the greatest sleight of hand in history. Right? Trading up. Got out at that point. Almost killed Time Warner.

16:11Coming up, we're expecting maybe he did. Cheese will be next. Coming up next on Squawk Pod, Treasury Secretary Scott Besant on the political rhetoric surrounding the government shutdown, his candidate search for a new Fed chair, and... Can we talk... I don't think we've ever talked soybeans. President Trump could confront China over its refusal to purchase a key U.S. crop. It's unfortunate the Chinese leadership has decided to use the American farmers, soybean farmers in particular, as a hostage or pawn in the trade negotiations. And a trivia question for you. It is time for October Baseball. Babe Ruth was the first player to hit 60 home runs in a season.

16:56What happened to his record on October 1st in 1961, 64 years ago yesterday? Yes, there's a point. Stay tuned after this break.

17:11Welcome back to Squawk Pod from CNBC. Today, with Joe Kernan and Becky Quick and the answer to our trivia question, October 1st, 1961, Roger Maris of the New York Yankees surpassed Babe Ruth's home run record. Some of us remember those days. I guess that's a hard... You said it yourself. But that's a hard question now. Oh, because I was there. It's a hard question if you're not old. I was there. You said it, not me. I know. We're in day two of the government shutdown. Join us now with where the administration stands on the latest Treasury Secretary Scott Besson. Scott, it helps to, Mr. Secretary, it helps to have seen the moon landing, doesn't it?

17:52I mean, isn't there something beneficial about having some experience in life, or is it me? Joe, I find good to be with you and Becky. I find wisdom's good. I remember when my dad got me up early in the morning to watch the moon landing. So I think I was seven years old. I know. Then we, you know, unlike some other people, we know what actually happened and that the flag wasn't waving. I wasn't there to see it, but I believe it. OK, this this sector day two. I guess I'll start with with what we're hearing from OMB and or at least rumors of possible real action taken to to do some things permanently during this shutdown within the next 48 hours or so.

18:39Can you give it shed any light on whether that's really going to happen or was it a bargaining chip for Republicans to get Democrats to agree to keep the government open? Well, Joe, let's just step back for a minute and look how we got here. Chuck Schumer did the right thing in the spring and led the Senate to a clean CR. What we've got here is the House has passed a clean CR. The Republicans have the votes in the Senate and he will not allow his members to come across. And what's changed since then is it's his poll numbers. So, you know, the president, Vice President Vance, Speaker Johnson, leader Thune, they're not negotiating with Chuck Schumer and Hakeem Jeffries.

19:26They're negotiating with Representative Ocasio-Cortez because she's nipping at his heels. And, you know, so the American people are being held hostage by Chuck Schumer's poll numbers. And, you We're starting to see some of the moderate, the very few moderate members left in the Democratic Party in the Senate drift toward wanting a solution. Chuck Schumer's blocking it. When I look at Chuck Schumer and Hakeem Jeffries straight out of Brooklyn, it makes me glad that I left New York in 2020. And your question about the shutdown, this is a choice that Schumer and Hakeem Jeffries have made. And if they want to shut the government down, then there are ramifications.

20:15I'm just wondering, do you think that there is, is it more than just bargaining then? Would the president, would Russ vote, would they like to do some, they've already pulled back on some funding in some blue states for, I don't know, climate initiatives. So they're going ahead with some of these things. Do you think they'd like to finally shrink the size of the federal government and use this as the opportunity? Or are they hoping that we get things settled within the next couple of days, then that they don't have to do that? Well, what they want is what's good for the American people and what's good for the country is a clean CR.

20:59The Democrats want to negotiate like terrorists. They want to say, this is what we have to have, and if we don't get it, we're going to close down the government. So what President Trump, Vice President Vance, and the Republican leadership want is for the Democratic side to show a little leadership. And I don't think it's unreasonable for the president to use all the levers. Because, Joe, what they are asking for, they're asking for$1.5 trillion increase in spending. And let's just go back. That would be almost as big as the ill-fated IRA, which caused the worst inflation in half a century. So they want to put this inflationary impulse into President Trump's already strong economy.

21:48The economy is growing at 3.8%. We don't need$1.5 trillion pumped in. The Democrats seem to love inflation. But getting back to Joe's kind of premise on this, are these furloughs or job layoffs in the federal government, are those going to come anyway? Because that's what the Democrats have suggested, that the Trump administration is going to push forward with layoffs and with furloughs anyway, whether they do this or not. Is that true? Again, it's a talking point. Senator Schumer, Representative Jeffries, they're weak, they're discombobulated, they don't represent the American people, and they're making up excuses.

22:33So we'll see. I think that this is an opportunity, and they're using this opportunity. President Trump, in the first nine months now, has been unstoppable. They've tried to stop him in the courts. They tried to stop him in the press. And now they're trying to stop him with this shutdown. Yeah, Mr. Secretary, there's a piece yesterday, an op ed piece in a journal, I think from the editors themselves that said it they were urging Republicans not to to get soft on some of the Medicare. I'm sorry, Medicaid cuts that we saw in the OBB and that they're starting to see some buyer's remorse from from moderate Republicans in their willingness maybe to to talk about extending these COVID era Obamacare subsidies.

23:26I mean, the way Obamacare is right now, and I don't know, maybe you're good with, you know, you're in investment banking. You can design something perhaps better because that's why we're in this mess. That's why we need these subsidies right now, because it doesn't work the way it was intended. And all the unintended consequences of Obamacare are coming home to roost at this point. That's why we need a trillion and a half dollars to try to keep it afloat. Can you fix it? What would you do? Well, Joe, what we're seeing is President Trump's leadership. We're seeing this, what's going to be a dramatic cut in prescription drug prices, which is one of the bigger parts of the health care budget.

24:10So President Trump is laser focused on that, negotiating with big pharma. And just to be clear, the spending cuts that occurred in the one big beautiful bill were the largest in history. And we're not going to go back on them. I came out from behind my desk and wanted to join the government to right the ship and get our fiscal house in order. We were left with a mess. It was the largest deficit when we weren't in a recession, weren't at war. and we are fixing the deficit. And there could be a discussion, but this isn't the way to have a discussion. Shutting down the government and lowering the GDP.

24:55We have a 3.8 % GDP and the Democrats shut down the government that we could see a hit to the GDP, a hit to growth and a hit to working Americans. But do you see that as what finally gets this done at some type of concession for Republicans to extend those COVID-era super Obamacare subsidies. Is that what Republicans should be agreeing to, to have Democrats agreed for the CR, to vote on the CR? Is that the way it should be done? Well, I can guarantee you there's not going to be an agreement to get the CR. There may be an agreement to have talks. This is going to be a clean CR. When Biden was president, the Republicans passed 13 CRs.

25:45We didn't close down the government. And, you know, again, as I said, what's changed between now and the spring? It's Senator Schumer's poll numbers, which are plummeting. We'll move on to trade quickly. I don't know. These never last that long. I don't think the market never looks much at the shutdown. So I figure, I don't know, three, four days, I think, when it's over. But can we talk, I don't think we've ever talked soybeans in terms of China, but this is a real issue right now. Our farmers are getting caught up in the trade dispute. Is there anything the president can do, or what do you expect to happen between the president and President Xi?

26:28Well, there's plenty the president can do, And it's unfortunate that Chinese leadership has decided to use the American farmers, soybean farmers in particular, as a hostage or pawn in the trade negotiations. And American farmers overwhelmingly voted for President Trump more than 90 percent. He loves the farmers. He loves them. We have a great secretary of agriculture, Brooke Rollins. Three of us were in the Oval yesterday. and you should expect some news on Tuesday on substantial report or substantial support for our farmers, especially the soybean farmers. They've had President Trump's back and we've got their back.