Biden’s fiscal failures loom over treasury nominee’s path

Thursday’s confirmation hearing for treasury secretary nominee Scott Bessent carries immense importance, given the fragile state of America’s fiscal foundation. You would expect senators to focus on treasury-related questions. However, instead of addressing the consequences of Janet Yellen financing U.S. debt at the short end of the yield curve or the challenge of refinancing nearly $7 trillion in the coming months, senators chose to grandstand and indulge in self-serving rhetoric.

Bessent opened his statement by highlighting his “only in America” story of achieving the American dream and his determination to preserve it for future generations. He also emphasized the need to secure supply chains, shift from wasteful government spending to productive investments that grow the economy, and maintain tax cuts to prevent massive tax hikes on Americans.

Responding to one senator’s question, Bessent said he often relies on the principle ‘no data, no opinion.’

One of the most encouraging aspects of the hearing was Bessent’s repeated focus on Main Street and small businesses. He acknowledged Wall Street’s strong performance in recent years and emphasized the need for a Main Street and small business-led recovery to drive growth and economic strength.

Bessent also recognized the excessive concentration in the U.S. banking system. He noted that regulations implemented after the Great Recession have burdened smaller community banks, hindering their formation and operations. These policies have also increased systemic risk by consolidating assets among larger financial institutions. His acknowledgment of the need for policies that prioritize Main Street over Wall Street is both refreshing and essential.

In response to a question from Senator Marsha Blackburn (R-Tenn.) about central bank digital currencies — a digital version of the U.S. dollar that could be controlled and programmed by the Federal Reserve and the government — Bessent expressed opposition. He sees no need for the United States to adopt a CBDC, a stance that likely reassures many Americans concerned about potential threats to individual freedoms.

Oddly, much of the discussion, particularly from the Democratic senators, was centered around tax policy versus spending, with the senators refusing to acknowledge their starring role in the overspending, that the Tax Cuts and Jobs Act increased government revenue, or that collections are not a deficit driver — spending is.

We have a tough road ahead. The Biden administration has left the United States with a debt-to-GDP ratio exceeding 120% and a deficit at 6%-7% of GDP — levels typically seen during wartime, not in a period of “economic expansion.” Combined with a strong dollar, substantial foreign asset holdings, and other factors, returning to a sustainable and prosperous economic path will require careful execution.

Bessent brings extensive experience across Wall Street, central bank advisory roles, and other economic arenas, equipping him with the qualifications and temperament needed to navigate this uncertain terrain. Responding to one senator’s question, Bessent said he often relies on the principle “no data, no opinion.”

Bessent’s confirmation should proceed smoothly, but the real test lies ahead as he takes on the daunting task of stabilizing America’s financial foundation.