President-elect Donald Trump’s nominee to lead the Treasury Department said federal spending is “out of control.”
Scott Bessent, an investor and hedge fund manager, testified Thursday before the U.S. Senate Finance Committee.
“We do not have a revenue problem in the United States of America. We have a spending problem,” Bessent said. “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 U.S. national debt stands at more than $36 trillion and is expected to surpass $37 trillion later this year. Experts and federal authorities, including the U.S. Government Accountability Office, have warned for years that federal spending remains on an unsustainable path.
Congress has run a deficit every year since 2001. In the past 50 years, the federal government has ended with a fiscal year-end budget surplus four times, most recently in 2001.
Bessent also noted his spending concerns in his opening remarks.
“The federal government has a significant spending problem driving deficits that have averaged an historically high 7% of GDP during the past four years,” he said. “We must work to get our fiscal house in order and adjust federal domestic discretionary spending that has grown by an astonishing 40% over the past four years.”
He also made the case for extending the tax rates established under the 2017 Tax Cuts and Jobs Act.
“As we begin 2025, Americans are barreling toward an economic crisis at year end,” he said. “If Congress fails to act, Americans will face the largest tax increase in history, a crushing $4 trillion tax hike. 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.”
The Congressional Budget Office has estimated that extending those tax provisions will cost about $4 trillion over the next decade.
Bessent also pushed back against claims that Trump’s policies would result in higher costs for consumers.
Bessent said he expects inflation to be “much closer” to the Federal Reserve’s 2% target during Trump’s second term.
U.S. Sen. Maggie Hassan, D-New Hampshire, asked Bessent if he thought any of Trump’s proposed policies would increase inflation.
“Nothing I can immediately think of,” Bessent replied.
On the campaign trail, Trump proposed imposing a 10% to 20% across-the-board tariff on all imports and tariffs up to 60% on China to help offset the costs of keeping the 2017 Tax Cuts and Jobs Act tax provision in place. After winning the election, Trump said he’d hit both Mexico and Canada with 25% tariffs and add another 10% to China’s bill on his first day in office. Trump said that those tariffs wouldn’t be eliminated until Mexico and Canada secure their borders and China stops the export of fentanyl precursors.
Trump previously said he couldn’t guarantee that his tariff plans would not raise U.S. consumers’ prices.
Tariffs could raise prices for U.S. consumers and slow economic growth. According to a post-election report, S&P Global, a credit-rating agency, reported that Trump’s proposed tariffs could boost inflation by 1.8% and lower U.S. economic output by 1%.
Under questioning from U.S. Sen. Elizabeth Warren, D-Mass, Bessent said he was open to raising the debt ceiling if Trump wanted to do so. However, he likened removing the debt ceiling to removing a car’s handbrake.
The debt limit is the total amount of money the U.S. government is authorized to borrow to meet existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds and other payments.
Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit. Fourty-nine of those times were under Republican presidents and 29 times under Democratic presidents, according to the Treasury Department.
Treasury Secretary Janet Yellen told Congress in a letter on Dec. 27 that Treasury expects to hit the new debt limit between Jan. 14 and Jan. 23, “at which time it will be necessary for Treasury to start taking extraordinary measures.”
Trump has promised to cut “hundreds of billions” in federal spending in 2025 through the reconciliation process. Trump’s hand-picked leaders for the newly created Department of Government Efficiency have also promised to cut spending. DOGE co-leader and Tesla boss Elon Musk initially suggested DOGE could cut $2 trillion in spending. Musk more recently said the group will aim for $2 trillion, but likely come up with half that amount.
Congress controls the purse strings for discretionary spending, which totaled about $1.7 trillion in 2023. Congress generally allocates about half of its discretionary spending to the U.S. Department of Defense.
