What Trump's Treasury secretary has planned for the economy
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Treasury secretary nominee Scott Bessent. Photo: Dominic Gwinn/Middle East Images/AFP via Getty Images
The centerpiece of Treasury secretary nominee Scott Bessent's economic agenda is what he calls a "3/3/3" approach to policy: cutting the budget deficit to 3% of GDP, achieving 3% annual growth, and increasing domestic oil production by 3 million barrels per day.
Why it matters: If achieved, these goals would result in a more sustainable fiscal picture, paired with much faster growth than is projected under most mainstream forecasts. But they are in tension with other aspects of President-elect Trump's agenda.
- How those tensions are resolved — and particularly how Bessent's pro-market impulses fare in internal battles over tariffs, immigration and more — will shape the economy and fiscal picture for years to come.
- Stocks rose and bond yields plunged Monday morning as markets digested the Bessent appointment, judging that he would bring a counterweight to more populist forces in the administration.
State of play: The first leg of Bessent's 3/3/3 strategy is music to deficit hawks' ears. Deficits are currently on track to run in the 6% to 7% of GDP range for years to come, creating an upward spiral that risks much higher interest rates or challenges rolling over the national debt.
- The deficit doesn't need to be cut all the way to zero to be sustainable. Just getting the budget into "primary surplus," or into surplus excluding interest payments, would put the U.S. on much stronger fiscal footing.
- The intuition is that, even as the nation continues carrying the cost of debt service from decades of previously accumulated obligations, a primary surplus would mean the U.S. has stopped adding to the pile.
- A 3% overall deficit would imply a healthy primary surplus in the latter part of this decade — at least in the Congressional Budget Office's "baseline scenario," which assumes Trump's prior tax cuts are allowed to expire at the end of 2025.
Yes, but: Bessent will be a key voice in negotiations about extending those tax cuts, and it is uncertain the extent to which they will include offsetting spending cuts or tax increases that avoid blowing out the deficit further.
What they're saying: "He cares about deficits, he cares about economic growth and he recognizes that there is a huge connection between the two," Maya MacGuineas, president of the Committee for a Responsible Federal Budget, tells Axios.
- "His 3/3/3 framework is auspicious but would be a tremendous success if achieved," she said.
- "It will be important that tax cuts are offset and everything including entitlements are on the table to generate such large savings, but higher growth and lower deficits would be a tremendous accomplishment."
The second leg of Bessent's 3/3/3 strategy calls for growth well above what most long-term projections view as likely for the U.S. economy — but not implausibly so.
The big picture: The United States has achieved growth in the 3% ballpark for long stretches of its history. But that goal is in tension with Trump's restrictionist immigration policy.
- A 3% growth rate has been largely achieved the last couple of years, including a 3.2% year-over-year GDP gain in the fourth quarter of 2023. That was partly fueled by a surge in immigration that resulted in more workers — a surge Trump pledges to reverse.
Between the lines: There are, in an arithmetic sense, only two ways for economic output to grow. Either people put in more work hours, or employers find ways to achieve more economic output for every hour worked.
- For 2025, for example, the CBO projects that the potential labor force will rise by 1.2%, while potential labor productivity will rise by 1%, for a combined 2.2% total growth in potential GDP.
- Bessent and other Trump allies argue that the incoming administration's deregulatory zeal and capital-friendly tax policies will unleash businesses to become more productive.
- The AI revolution may also start to pay meaningful productivity dividends in the coming years.
Reality check: If the incoming administration enacts large-scale deportations of undocumented workers and tightens the screws on new entrants to the U.S., it would mean less labor supply, which would make achieving ambitious goals for overall GDP growth harder.
- The gap could be closed some if the nation achieved higher labor force participation among native-born Americans, particularly working-age men who have slipped out of the workforce over recent decades.
The bottom line: The country would be richer if Bessent's 3/3/3 goals are met, but that may prove easier said than done.
- We'll leave the third 3 (more oil production) for others to consider, but it's worth noting that daily U.S. production is already around 13 million barrels, there's a glut in the market, and energy executives question both the geological plausibility and financial wisdom of dramatic further expansion.
