President-elect Donald Trump announced Scott Bessent, a Wall Street financier, as his Treasury secretary on Nov. 22 after weeks of speculation. Trump praised Bessent as a respected international investor and strategist, highlighting his success story as an embodiment of the American Dream.
Bessent, 62, founded the global macro investment firm Key Square Group and made a fortune betting against the Japanese yen with George Soros. Before that, he interned with Jim Rogers and worked at various investment firms. He also served as an adjunct professor at Yale University and is involved in philanthropy, supporting hospitals and scholarships.
As Treasury secretary, Bessent will oversee various portfolios, including cryptocurrency and tariffs. Known for his advocacy of cryptocurrency, he has praised Trump’s stance on digital assets and highlighted Bitcoin’s appeal to younger investors. Bessent’s support for tariffs aligns with Trump’s policies, advocating for gradual implementation to mitigate price increases.
Bessent’s three-point economic plan focuses on achieving 3% real economic growth through deregulation, more U.S. investment, and a focus on domestic production. His expertise and experience will shape U.S. economic policies, particularly in the areas of cryptocurrency and trade.
Redefining energy production, combating inflation, and offering guidance on competence for individuals to invest—allowing the private sector to replace excessive government spending.
According to Bessent, his proposal was influenced by the late Japanese Prime Minister Shinzo Abe’s “three arrows” economic recovery strategy, also known as “Abenomics.”
Bessent has also expressed his intention to encourage Trump to announce publicly his goal to reduce the deficit to 3 percent of GDP “by the end of his term.”
“He did not lead us to the 6 percent or 7 percent [of GDP] deficit. The average was 4 under his leadership, so bring that down to 3,” Bessent remarked at a Manhattan Institute conference in June.
The U.S. government budget deficit is the highest among OECD nations, standing at nearly 6 percent of GDP last year. Japan (5.6 percent), France (3.8 percent), and the United Kingdom (3.6 percent) follow closely behind.
A significant federal deficit has emerged despite the absence of an economic downturn in the country.
The national debt clock at a bus station in Washington on Aug. 6, 2024. Madalina Vasiliu/The Epoch Times
“A robust economy typically results in higher tax revenues for the government and reduced expenditures on unemployment benefits, leading to improved government finances,” stated Torsten Slok, chief economist at Apollo, in a note.
“If growth slows down and the unemployment rate increases, the fiscal position of the US will further deteriorate.”
Over the past few years, the U.S. Treasury has injected trillions of dollars in bonds into global capital markets. A significant portion of the issuance has focused on short-term debt securities to manage escalating deficits and increasing interest rates.
The incoming Treasury head will confront similar challenges as the current incumbent, Janet Yellen: escalating debts and deficits.
According to the Congressional Budget Office, the annual federal deficit is projected to range between $1.75 trillion and $2.86 trillion over the next decade.
While the national debt was not a prominent topic in the 2024 election campaign, the Trump administration believes that the country’s fiscal well-being can be enhanced in the next four years.
The national debt recently surpassed the $36 trillion mark, according to the Treasury’s Debt-to-the-Penny dashboard.
Advocating for a ‘Shadow Fed Chair’
Recently, Bessent proposed the idea of having a “shadow Fed Chair” for Trump. This would involve nominating Powell’s successor before the end of his second term.
“You could make the earliest Fed nomination and establish a shadow Fed chair,” Bessent suggested. “And based on the concept of forward guidance, people won’t really care about what [Fed Chair Jerome] Powell has to say anymore.”
If Trump implements his three-point economic plan, the Fed could smoothly transition “into a proper easing cycle.”
Wall Street is closely watching the dynamics between Trump and Powell.
Federal Reserve Chairman Jerome Powell speaks during a news conference at the William McChesney Martin Jr. Federal Reserve Board Building in Washington on Sept. 18, 2024. Anna Moneymaker/Getty Images
Powell affirmed at a recent press conference that he would not step down if requested by Trump as a potential termination is “not allowed by law.”
The president-elect has indicated that he would let Powell serve out the remainder of his term, which concludes in 2026, “especially if I believed he was making the right decisions.”
Trump has expressed his opinion that presidents should have a role in the Fed’s monetary policy decisions, although he does not think the president should have the final say.
Therefore, the relationship between the White House and the Federal Reserve could be tumultuous in the coming two years, causing concern among investors due to the uncertainty.
