Treasury Nominee Bessent Touts Fiscal Discipline in Confirmation Hearing

The former Soros CIO and hedge fund manager discussed tax policy, sanctions and deregulation while answering questions from the Senate Finance Committee Thursday.



Scott Bessent, nominated by President-elect Donald Trump to be secretary of the treasury, stressed the need for the U.S. dollar to retain its status at as the world’s reserve currency in opening remarks made during his confirmation hearing before the U.S. Senate Committee on Finance on Thursday.
 

Also in his opening remarks, Bessent, a former CIO and partner in Soros Fund Management and founder of hedge fund Key Square Group, identified the affordability of U.S. housing and the level of federal spending as areas he feels should be addressed. Bessent also said that the Trump administration has an opportunity to achieve a “new economic golden age.”   

During the campaign and since Trump’s re-election, Bessent has promoted his 3-3-3 plan, in which the U.S. would increase oil production by 3 million barrels per day, grow real gross domestic product by 3% and reduce the federal budget deficit to 3% of GDP. In 2024, the federal budget deficit was 6.4% of GDP, considerably higher than the 50-year average of 3.8%, according to the Congressional Budget Office.  

Tariffs 

Want the latest institutional investment industry
news and insights? Sign up for CIO newsletters.

Bessent, a supporter of tariffs on foreign goods entering the U.S., in response to statements from Senator Ron Wyden, D-Oregon, said in the hearing that the impact of the trade duties could be mitigated by changes in the exchange rate, and would not be felt by consumers. Wyden, the committee’s top Democrat, said he worries American consumers, not tariffed countries, would pay for them. 

In response to a question from Senator Bill Cassidy, R-Louisiana, about imposing a pollution fee (“carbon tariff”) on carbon-intensive imports, Bessent said the idea was interesting and could be a part of a future tariff policy.  

Throughout the hearing, Bessent said China has been exporting cheap goods to the U.S. and the world through its industrial policy. He went on to say that China has the most imbalanced economy in the world and that he would support further restricting and monitoring U.S. investment in Chinese companies, which he said have helped China develop its military and other critical sectors.  

Senator Peter Welch, D-Vermont, said he was supportive of increasing tariffs on China, but sought assurances from Bessent regarding tariffs on imports from Canada, which Trump has threatened and which could affect Vermont’s economy due to its proximity to Canada. Bessent offered no guarantees.  

Sanctions Policy  

Bessent also remarked that he would support increasing tariffs on Russian oil producers, if that would help bring Russia to the negotiating table to end the war in Ukraine. Bessent also criticized President Joe Biden’s administration’s handling of sanctions on U.S. adversaries, including accusing Biden officials of not being aggressive enough in sanctioning Russia’s oil industry due to the fear of increasing energy prices.  

In response to questions from Senator John Barrasso, R-Wyoming, Bessent said the U.S. could weaken its adversaries through tough sanctions and offset any negative effects of sanctions on U.S. energy prices by increasing domestic energy production. The U.S. could make “Iran poor again,” Bessent said. 

In response to statement by Oregon’s Wyden, who said the U.S. was in a clean energy war with China, Bessent said the U.S. is in an energy race in general, pointing to the fact that China is building 100 new coal plants this year and numerous nuclear plans. Bessent said he wants to see more nuclear plants built in the U.S. 

Taxes, Social Security 

In response to numerous questions, Bessent said allowing key provisions of the 2017 Tax Cuts and Jobs Act, enacted during the first Trump administration, to expire would be harmful to millions of middle- and working-class Americans. Bessent called the tax cut extensions the most important economic issue of the day and said it would be an “economic calamity” if they were not extended.  

Bessent also said Trump would not make cuts to Social Security. Louisiana’s Cassidy asked Bessent for his views on setting up a pension investment fund or a sovereign wealth fund to benefit Social Security. Bessent said the idea was something that could be very exciting, but there was significant work to do before such a plan could begin to be implemented.  

Central Bank Digital Currencies 

In response to questions from Senator Marsha Blackburn, R-Tennessee, Bessent said he would not support the adoption of a central bank digital currency and sees no need for one. The nominee said countries that adopt CBDCs do so out of necessity because they have no other investment alternatives, which does not make sense for the U.S., according to Bessent. 

Debt Limit and Banking System 

Senator Elizabeth Warren, D-Massachusetts, sought assurance from Bessent that he, like the unlikely duo of Warren and Trump, wants to get rid of the debt limit.  

Bessent responded that the U.S. would not default on its debt if he was confirmed. He said that if Trump wanted to get rid of the debt limit, Bessent would work with Trump and Warren on that. Before committing, however, he said he would want to survey market participants and share their responses.  

Senator Tim Scott, R-South Carolina, asked Bessent for his assessment of the stability of the banking system. Bessent said the strength of the U.S. economy and its financial markets are the depth and breadth of the financial system. The nominee also said the top five U.S. banks have become “too big,” to the detriment of smaller and community banks, and that the banking system was well capitalized, perhaps over capitalized.  

Health Care and Private Equity 

Responding to a question from Senator Tina Smith, D-Minnesota, about the impact of private equity and corporations acquiring health care businesses on the quality and cost of health care in the U.S., Bessent said he had been trying to understand the drivers of health care costs for 10 years but has not been able to do so. “What you are identifying could be one of the problems,” Bessent said. 

A bipartisan Senate Budget Committee report released last week concluded that PE firms prioritized profits over patients. 

Related Stories: 

What Scott Bessent’s Appointment Means for Institutional Investors 

Soros Names Bessent as New CIO to Run $25 Billion Firm 

Soros Picks New Family Office CIO 

Tags: , , , ,

«