By David Lawder
WASHINGTON (Reuters) – Scott Bessent, President-elect Donald Trump’s treasury secretary pick, said on Thursday that the dollar should remain the world’s reserve currency, the Federal Reserve should remain independent and he was prepared to impose tougher sanctions against Russian oil. sector.
Bessent, testifying at a Senate Finance Committee confirmation hearing, stressed the urgent need to extend individual tax cuts decided by Trump in 2017, saying letting them expire at the end of this year would trigger a hike $4 trillion in taxes that could crush the U.S. economy.
“If we do not renew and extend, then we will face economic calamity,” Bessent said. “We will see a gigantic tax increase on the middle class.”
Bessent, a hedge fund manager and founder of Key Square Capital Management, expressed support for Trump’s plans to impose high tariffs, saying they would combat unfair trade practices, raise revenues and increase leverage. negotiation of the United States, including on non-trade issues.
In prepared remarks, he said pro-growth tax, investment, trade and energy policies would pave the way for “a new economic golden age” of prosperity.
RUSSIAN OIL SANCTIONS
Bessent said U.S. sanctions on the Russian oil sector were too weak, in part because the Biden administration was too concerned about rising prices while limiting U.S. oil production. An increase in U.S. oil production would allow tougher sanctions against Russian oil majors, he said.
“I think if officials in the Russian Federation are watching this confirmation hearing, they should know that if I am confirmed, and if President Trump requests it as part of his strategy to end the war in Ukraine, I will agree 100% by increasing sanctions – especially against Russian oil majors – to levels that would bring the Russian Federation to the negotiating table,” Bessent said.
He also had harsh words for China, calling it “the most unbalanced and unbalanced economy in the history of the world”, an economy that was trying to export its way out of a ” severe recession/depression” and the US could not allow China to do so. flood US or global markets with cheap products.
NO DRAMA
If confirmed by the Senate, Bessent would be the first openly gay Treasury secretary and confirmed cabinet member in a Republican administration. The South Carolina native’s husband, former New York City Attorney John Freeman, and their two children, Cole and Caroline, sat behind him.
During a hearing marked by non-violent exchanges, Bessent calmly answered questions ranging from child tax credits to the impacts of tariffs on farmers and did not stray from answers consistent with precedent Republican Treasury candidates, but without contradicting Trump’s political plans.
He said U.S. spending on President Joe Biden’s clean energy tax credit and high deficits in recent years were due to a “spending problem.” When asked whether to reinstate a 100% business research and development tax credit, he said his “incline” would be to support the proposal.
INDEPENDENCE OF THE FED
Markets were expected to scrutinize Bessent’s comments on maintaining the independence of the Federal Reserve to see whether Trump would attempt to exert control over the U.S. central bank, given the president-elect’s frequent complaints about the Fed’s decisions in interest rate matters.
But he came out strongly in favor of the independence of the Fed’s monetary policy, adding that Trump would continue to make his views known.
“I think when it comes to monetary policy decisions, the FOMC should be independent,” Bessent said, referring to the Fed’s rate-setting committee, the Federal Open Market Committee.
Although some economists have said that Trump’s plans to impose tariffs, cut taxes and curb immigration would be inflationary, Bessent disagrees, saying that Trump’s plans, including l Increased energy production would bring inflation back to the Fed’s 2% target while raising wages.
Despite Trump’s long-standing complaints that a strong dollar hurts U.S. exports, Bessent said: “Crucially – crucially – we must ensure that the dollar remains the world’s reserve currency. »
Bessent also rejected the idea of a central bank digital currency for the Fed, saying the widespread use of the dollar and security made that unnecessary. He said he was open to the idea of creating a U.S. sovereign wealth fund, but said the U.S. first needs to control short-term deficit growth.
HIGH DEBT, LESS CAPACITY
Bessent promised there would be no defaults on U.S. Treasury debt under his leadership. When asked whether Congress should abandon the federal debt ceiling, Bessent said that if Trump asked, he would work with Congress to make it happen.
High debt levels mean there is less ability to borrow heavily to fight a crisis, Bessent said, citing examples from the Great Depression of the 1930s, World War II and the recent COVID-19 pandemic. COVID-19.
“Treasury – along with the entire government and Congress – used its borrowing capacity to save the Union, save the world and save the American people,” Bessent said. “What we have now, we would struggle to do the same.”
