Treasury Secretary Blames Democrats for 6.4% Deficit, Citing Spending Surge

Scott Bessent, the current US Treasury Secretary, addressed Congress on Wednesday, attributing the significant increase in the deficit this year to excessive spending by Democrats, rather than Republican tax cuts. During a House Ways and Means Committee hearing, he projected that the deficit for the 2025 fiscal year would range between 6.5% and 6.7% of GDP, marking the third consecutive year the figure has exceeded 6%.

Bessent was adamant that the primary cause of the deficit was not tax cuts but rather the surge in government spending. He criticized Democrats for their fiscal policies, which he claimed have led to unprecedented levels of federal expenditure. The 2024 fiscal year, which concluded in September, saw a 6.4% deficit, following a 6.2% deficit in 2023. Bessent accused Democrats of abandoning fiscal discipline, asserting that their policies are the main driver of America’s deteriorating fiscal health.

Democratic Representative Mike Thompson challenged Bessent during the hearing, arguing that both increased spending and Republican-led tax cuts have contributed to the national debt. Thompson cited expert opinions that the proposed Trump tax cuts would also add to the debt. However, Bessent maintained that the deficit is primarily due to rising discretionary spending and refused to link the Trump administration’s tax policy to the deficit.

Tensions escalated when Republican Congressman Thomas Massie, who opposed the GOP tax bill, suggested that concerns over rising deficits had pushed bond yields higher. Bessent dismissed this notion, stating that it is incorrect to judge the market based on a single day of trading. He pointed out that US 10-year yields are actually lower than they were at the start of the year, unlike in Germany and Japan, where yields have risen.

Ranking Democrat Richard Neal attempted to shift the focus to tax revenue, claiming that it has increased due to President Joe Biden’s boost to the IRS budget. Bessent, however, attributed the improved revenue collection to the IRS’s outdated systems rather than increased staff. He criticized the Democrats for focusing on hiring more people instead of fixing the agency’s technological infrastructure, which he described as being in poor condition.

The conversation shifted when speculation arose about Bessent potentially replacing Jerome Powell as Fed Chair. Bessent denied these rumors under oath, stating that he is not involved in such discussions. The White House has also publicly dismissed the idea, but the speculation persists. Bessent chose to focus on his policy goals, emphasizing the importance of US industrial capacity, particularly in strategic industries like steel. He argued that the Offshore Balanced Budget Bill (OBBB) is essential for the US to remain competitive with other countries that subsidize their industries.

Democrat Linda Sanchez challenged Bessent’s stance, citing a report by the Yale Budget Lab that predicts the OBBB will increase the national debt by $3.4 trillion by 2034. Bessent dismissed the report as politically biased, despite it being labeled nonpartisan, by pointing out that the Yale Budget Lab is staffed by former Biden officials.

Before concluding, Republican Lloyd Smucker from Pennsylvania inquired about Bessent’s 3-3-3 plan, which aims for 3% GDP growth, a 3% deficit-to-GDP ratio, and an additional 3 million barrels of oil per day in production. Bessent confirmed that the plan is still on track.