Trump’s Treasury Pick Warns of ‘Economic Calamity’ if Tax Cuts Expire
At his confirmation hearing before the Senate Finance Committee on Thursday, Treasury Secretary nominee Scott Bessent defended President-elect Donald Trump’s economic proposals for tax cuts and higher tariffs while deriding federal spending that he described as “out of control.”
Bessent, a wealthy financier who rose to prominence investing in currencies at Soros Fund Management, told lawmakers that the U.S. could face an economic crisis if lawmakers fail to extend the 2017 Tax Cuts and Jobs Act, key provisions of which are set to expire at the end of 2025.
“This is the single most important economic issue of the day — this is pass/fail,” Bessent said. “If we do not fix these tax cuts, if we do not renew and extend, we will be facing an economic calamity. And as always with financial instability, that falls on the middle-class people.”
Bessent also spoke in favor of significant spending cuts to cover the cost of lost revenues from extending the tax cuts. “We do not have a revenue problem in the United States of America,” he said. “We have a spending problem. This is one of the things that got me out from behind my desk and my quiet life in this campaign, was the thought that this spending is out of control.”
The reward for enacting the right mix of policies could be enormous, he suggested. “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,” he said in his introductory remarks.
Debt ceiling: Bessent sought to reassure lawmakers that if he is confirmed, the U.S. will not default on its debt obligations, saying he assumes there would be an “enormous cost” involved in a default. He also said he was open to eliminating the debt ceiling, the legal limit on U.S. debt issuance. “Once President Trump takes office, and if I’m confirmed, if he wants to eliminate the debt limit, I will work with him and you on that,” he told Democratic Sen. Elizabeth Warren.
At the same time, Bessent took note of the exceptionally high level of the national debt. “We have never seen this before when it is not a recession or not a war,” he said. “Treasury, along with full government and Congress, has used its borrowing capacity to save the Union, to save the world and to save the American people and what we currently have now, we would be hard-pressed to do same.”
Tariffs and inflation: Bessent echoed Trump’s claim that higher tariffs on imports could be a significant “revenue raiser” that would boost the federal budget, as well as an important negotiating tool. He also pushed back against the notion that tariffs could create inflationary pressure as importers raise prices to cover their rising costs, saying that a stronger dollar would help offset any increased costs, shielding consumers from the full impact of any tariff hikes. More broadly, he said he didn’t think any of the policies Trump has proposed would be inflationary. Many economists have said otherwise.
No tax increases on the rich — or anyone else: Asked by Democratic Sen. Raphael Warnock if he agreed that it would be a good idea to end the 2017 tax cuts for those making more than $400,000 to help close the deficit and reduce the national debt, Bessent said no, because doing so would “capture an inordinate amount of small businesspeople” who earn between $400,000 and $1 million per year.
Warnock raised the threshold, asking if it would be a good idea to allow the tax cuts to expire for those earning $1 million and up. Bessent gave the same answer, saying it would hit small business owners who use pass-throughs, referring to a kind of tax structure frequently used by sole proprietors and partnerships.
Bessent also rejected the idea of letting the tax cuts expire for high earners at the $10 million threshold, saying, “it’s important that we put in incentive for them to invest.” Asked about $1 billion in individual earnings, Bessent said he would not support allowing the tax cuts to expire for those “job creators.”
Summing up, Warnock said, “So there’s no income level for which you would support raising taxes? Is that fair?” Bessent agreed, saying, “There’s no income level that I don’t think we should continue the TCJA as it was.”
Sanctions: Bessent said he would support more aggressive sanctions against Russia to pressure that nation to end its war in Ukraine. “If any officials in the Russian Federation are watching this confirmation hearing, they should know that if I’m confirmed, and if President Trump requests as part of his strategy to end the Ukraine war, that I will be 100% on board for taking sanctions up, especially on the Russian oil majors, to levels that would bring the Russian Federation to the table,” he said.
IRS: As Treasury secretary, Bessent would oversee the IRS. He said he would allow the Direct File program, which provides free filing for some taxpayers, to continue, at least for the current tax season, which begins on January 27. For-profit tax preparation companies have called for an end to the program, a cause taken up by some Republicans in Congress, but Bessent said he wanted to study the issue before making a decision.