- U.S. faces $4 trillion tax burden if Trump’s 2017 tax cuts aren’t extended
- The budget deficit has grown to 3.5%, and Bessent argues that spending, not revenue, is the problem
- Bessent warns that eliminating the tax breaks threatens the dollar’s status as the world’s reserve currency
- Democrats believe the tax breaks have only helped the rich, Bessent insists repealing them would hit the working and middle-class
- Bessent says Trump could launch a “golden age of the economy” if tax reform is made permanent
During his Senate confirmation hearing, U.S. Treasury Secretary-designate Scott Bessent said that we do not have a revenue problem — we have a spending problem, leading to a roughly 3.5% budget deficit while the economy faces an unprecedented $4 trillion tax burden if Congress does not extend the tax cuts enacted by Donald Trump in 2017. He said an end to the law could lead to financial instability, which would hit the middle and working classes hardest.
Bessent: U.S. Risking Loss of Dollar’s Status as Reserve Currency
Bessent emphasized that rejecting Trump’s tax reform would not only lead to steep tax increases but also threaten the dollar’s status as the world’s reserve currency. He said the tax burden, combined with high inflation and rising government debt, could undermine confidence in the U.S. economy on the global stage.
Expectedly, Republicans support Bessent and advocate the classic model where tax relief makes the economy more attractive to investors, affordable to citizens, and sustainable in the long run. Specifically, Bessent told Senate Finance Committee Chairman Mike Crapo (R-Idaho).
“This is the single most important economic issue of the day. If we do not renew and extend, then we will be facing an economic calamity and, as always with financial instability, that falls on the middle and working-class people.”
Thoth in turn did not question Bessent’s words, nor his qualifications in general:
“When it comes to your qualifications to be the next secretary of the Treasury, there is no room for debate and you have shown that today in the hearing.”
But also expectedly, Democrats did not appreciate Scott Bessent’s statements, and made a reference to Donald Trump’s 2017 tax cuts, criticizing them for being beneficial to the rich and corporations, but not helping ordinary people, and creating budget deficits. For example, Senate Finance Committee Ranking Member Ron Wyden (D-Ore.) said:
“I think that’s baloney the new tariffs were going to be paid for by workers and small businesses.”
Bessent gave his response to this:
“I would respectfully disagree, and the history of tariffs and optimal tariff theory does not support what you say. If we were to, say, use [a] 10% [import tax], then traditionally the currency appreciates by 4% so the 10 percent is not passed through.”
Overall, all of this is aimed at solving many of the problems that we have dealt with in detail very recently here, and in that context, he added:
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. China is in a severe recession and attempting to export their way out of that instead of the needed rebalance. We cannot allow them to flood our markets and the world.”
And as a consequence, it leads us back to Donald Trump’s policies with a focus on cutting not just taxes but spending and insisting on the need for tighter control of government spending and debt repayment, rather than shifting that to average Americans and manufacturing.
“We do not have a revenue problem — we have a spending problem, leading to a roughly 3.5% budget deficit.”
He added:
“What got me out from behind my desk and my quiet life is that spending is out of control. We have never seen this before when it’s not a recession or a war.”
Encapsulating his statement, he insists that Donald Trump’s policies should be the salvation of the American economy, and furthermore, if not done now, it will be too late later. Conversely, in his opinion, only Donald Trump’s policies can not only solve the accumulated problems but also take America to new heights:
“Today, I believe that President Trump has a generational opportunity to unleash a new economic golden age that will create more jobs, wealth and prosperity for all Americans. We must make permanent the 2017 Tax Cuts and Jobs Act and implement new pro-growth policies to reduce the tax burden on American manufacturers, service workers, and seniors.”
Conclusion
Yes, Scott Bessent is following Donald Trump’s strategy in a very unambiguous, confident, and persistent way. And does it have a rational and justified, or does an emotional component play a role and some sentimentality is present? It’s a pretty open question, depending on the proportion of the ratio of these components.
Personally, I would say that I agree with the seriousness of the problems that Bessent identifies, and I assume that measures to solve them also need to be fundamental and decisive. But whether I see this as sentimentality, to a certain extent I would say yes.
Similarly, can the objections to this policy on the part of Democrats be labeled mere speculation, or does it still have a rational well-founded concern? You can answer very differently, depending on what you prioritize.
Again, personally, I would say that some of this opposition is an extension of the opposition to the fact of Trump’s victory and the general belief that it will be for the good of the country.
Stay tuned for updates and be adaptive in the rapidly evolving political, financial, and crypto landscape.
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