What's in your wallet? Ask the new Treasury Secretary

0:01NPR

0:11Donald Trump takes office on January 20th, but that hasn't stopped him from making waves. in the market. On Monday, Trump announced one of his first executive orders would be to charge a 25 % tariff on all goods coming in from Mexico and Canada, as well as an extra 10 % for goods from China. We were wondering what the Treasury Secretary nominee Scott Besant thinks of that. Here at The Indicator, we watch this nomination closely because who is selected as the Treasury Secretary is a big deal. That will be clear to anyone who's watched or even hummed along with Hamilton, maybe the most famous musical about a treasury secretary ever.

0:51Yes, Alexander Hamilton was the very first treasury secretary. But aside from historical hip-hop musicals, what are the actual implications of this job for you and me? How does the treasury affect regular Americans? This is The Indicator from Planet Money. I'm Darian Woods. And I'm Waylon Wong. Today on the show, how the new face of American economic management might affect your wallet.

1:20This message comes from NPR sponsor Zendesk. Introducing the next generation of AI agents built to deliver resolutions for everyone. With an easy setup that can be completed in minutes, not months, Zendesk AI agents resolve 30 % of interactions instantly, quickly giving your customers what they need. Loved by over 10 ,000 companies, Zendesk AI makes service teams more efficient, businesses run better, and your customers happier. That's the Zendesk AI effect. Find out more at Zendesk.com. To learn more about what the Treasury Department does, we spoke to Karen Dynan. Karen was the chief economist at Treasury under Obama.

1:58She's also worked under President Bush. We asked Karen how the Treasury might affect our wallets. Do you have your wallet with you? I do, yes. Do you have a$10 bill in your wallet? Oh, I do have a$10 bill. What do you see on that$10 bill? I see Alexander Hamilton, now famous. Yes, our first Treasury Secretary. What do you see on the back of the bill? I see the U.S. Treasury. Yes, those are steps that I got to go up every single day. So whose signature do you see on that$10 bill? I see two. The Treasurer of the United States and Stephen T. Mnuchin, former now Secretary of the Treasury. But I guess he was the Secretary at the time of the printing of this bill.

2:43So it sounds like what you're saying is a lot will change. But what we know will change for sure is the signature on this$10 bill. The signature on the$10 bill will change. OK, so that's how the changes in the Treasury Secretary will literally change my wallet. But how will this affect everyday Americans' finances? Yeah, so let me break it out. Karen says to think of the Treasury as the agency that's in charge of the government's finances. You know, money coming in and out. Let's talk about the money going out of the government. So Treasury is essentially cutting the checks. So when people get their Social Security payment, it comes from the Treasury Department.

3:25If you received a payment from the government during COVID, like one of those economic impact payments, that came from the Treasury Department. So if you're receiving Social Security or are employed by the government, that's Treasury's hands all over your payment each month. And in normal times, this is a fairly routine task. Treasury advises the President and Congress about spending, they do the deciding, and then the Treasury writes the checks. But over the last decade or so, the debt ceiling has become this recurring fixture of politics, where the government routinely runs out of authorized funding.

4:02And several times, the Treasury has had to resort to what are known as extraordinary measures to find cash to pay, say, Social Security entitlements. Yeah, it's become a much more exciting job, if you want to characterize it that way. That is one way to put it. And some of those extraordinary measures include playing with federal employees' savings funds so that the government has more cash on hand for other things. The new Treasury Secretary could even take the nuclear option and default on debt payments. Yeah, that is unlikely. At least, we hope so. Now, on the side of money going into the government and out of our wallets, the big one is the Internal Revenue Service, the IRS, and that's a bureau within the Treasury Department.

4:46It collects the taxes. It doesn't set the law about taxes. That's done by Congress. But it's the Treasury Department and the Internal Revenue Service that makes sure that people are paying the taxes that by law they owe. Oh, and that's really important because if some people aren't doing that, that means the rest of us have to shoulder that burden. So if I get audited this year, God forbid, it's the IRS, which is within Treasury, which is overseen by this new Treasury secretary. You know who to plead messy, too. I'm getting out my receipts now. Now, generally speaking, the Treasury secretary and Treasury advises the president and Congress on taxing and spending decisions, which is nothing to sniff at.

5:30You know, Scott Besson will have to be the one fronting up to Donald Trump about whether or not his tariff plan can make up for lost revenue from tax cuts. And shepherding a big tax or spending bill through Congress, accounting for all the tweaks and changes suggested by politicians, is an art. Treasury also implements those decisions. But the department doesn't actually have much power to change big policies on its own. That's for the president and Congress. Treasury's power is having the politicians' ears and being the ones with the spreadsheets. Yeah, so Treasury has these restrictions on what it can do.

6:05But perhaps a big reason why Trump took comparatively longer to decide on the Treasury Secretary is that it has a lot of scope to mess things up. And that might be why Scott Bessent is seen as one of the more business-as-usual cabinet picks. You may be onto something. So let's take the example of government debt. Treasury is the one that holds the auctions for government bonds, the IOUs that fund some of the government. It's really important that that debt is managed responsibly. But it's also really important that the payments are made on that debt. And I think the average person might think, oh, that's not really relevant to my life.

6:44But it is relevant to your life. because if the people who are buying that debt, if they lose confidence in the U.S. government to making the payments on that debt, then those investors are going to demand a higher interest rate. So that's likely going to then increase interest rates for us all. So a mortgage could be more expensive, car loans, credit cards? Absolutely, yeah. Okay, so that definitely affects all of us. Then Karen says the stability of the financial system is in large part managed by the Treasury. Karen says take the great financial crisis in the late 2000s. Banks and lenders were in a panic.

7:28Loans were freezing up. So people wouldn't be able to get those mortgages that they needed to buy homes. Firms wouldn't be able to get loans to build factories. Some firms need loans to be able to make payroll on a regular basis. So, you know, a seizing up of the financial system is something that could be very destructive for the economy. It also could cause a lot of job loss. And so the Treasury Secretary needs to be there to step in and do what he or she can to stabilize the financial system and mitigate the harm that will be caused. Back then, that mitigation meant bailouts. Then-Treasury Secretary Henry Paulson got Congress and the president to approve$700 billion, which Treasury would use to buy toxic assets that no one else wanted to touch and that was seizing up the financial system.

8:23Those toxic assets were mostly based off mortgages that a lot of people weren't able to pay back. Treasury secretaries have dealt with financial crises all throughout U.S. history. The first was Alexander Hamilton in what was known as the Panic of 1792. Karen says that firsthand, the greatest time for Treasury officials was the mid-2010s, when the Alexander Hamilton musical brought the role of Treasury secretary to a wider audience. I think a lot of us had spent our lives as wonky people, nerdy people who, you know, were just, you know, into our subject areas. But then we had this moment where we felt really cool.

9:05Yeah, you could go to dinner parties and people would know what you were doing, roughly. Absolutely. And to recap, here's what they were doing. Managing the money coming in and out of the government, running the debt auctions, helping keep banks safe, and of course, writing the signatures on our bills. Now, everyone was watching what the Trump Treasury nominee's position on tariffs would be. Scott Besant has given lukewarm support for them, while also saying that abandoning the international trading system would be a major economic and strategic mistake. We'll go deeper into the tariff trade-offs Scott may face in our next episode, out Monday after our Thanksgiving break.

9:43Gobble, gobble. All right. Happy Thanksgiving, everyone. This episode was produced by Cooper Katz McKim and engineered by Jimmy Keely. It was fact-checked by Sierra Juarez. Kiki Cannon edits the show, and The Indicator is a production of NPR.