Scott Bessent, founder of Key Square Group (Heads Fund), who was appointed as Secretary of the Treasury, the ‘economic command center’ of the second US administration of Donald Trump, said, “I will start by implementing President-elect Trump’s various tax cut pledges.” In order to reduce the fiscal deficit caused by tax cuts, he said he would pursue a ‘pay-fors’ policy to reduce government spending through reform of Inflation Reduction Act (IRA) subsidies.
Bessent had his first interview with the Wall Street Journal (WSJ) on the 25th (local time) after being nominated as Secretary of the Treasury and said, “We will make permanent the temporary income tax and corporate tax cuts implemented during the first Trump administration, and provide tax exemptions for tips and overtime pay, etc.” “We will prioritize tax reduction policies,” he said. In addition, “tariffs, government spending and debt reduction are also policy priorities,” it said.
In particular, in order to control spending, it was also revealed that the subsidy system, which paid up to $7,500 (approximately 10.5 million won) per vehicle to North American electric vehicles according to IRA regulations, would be reformed. It is expected that this could also have an impact on Korean automobiles operating in the United States, such as Hyundai Motors and SK On, and electric vehicle battery companies.
Bessent is of the opinion that in order to reduce excessive government debt in the United States, the growth rate must be increased and tax revenues must be increased. According to Fox Business, President-elect Trump also proposed the ‘3-3-3′ policy, which means reducing the fiscal deficit, improving growth rate, and expanding energy production. This is modeled after former Japanese Prime Minister Shinzo Abe’s ’Three Arrows’ policy, which led to a weakening of the yen and implemented an economic stimulus package focused on increasing exports.
The ‘Becent Table’ three arrows aim to reduce the U.S. fiscal deficit, which is 6.4% of gross domestic product (GDP) in fiscal year 2024 (October 2023 to September this year), to less than 3% of GDP by 2028. The goal is to increase the growth rate from 2.5% to over 3% and produce at least 3 million barrels of crude oil per day. The logic is that by increasing energy production and encouraging private investment through deregulation, oil prices, the main cause of high inflation, can be lowered and government subsidy spending can also be reduced.
Like President-elect Trump, he is also in favor of aggressive tariffs. “Tariffs should be a tool to advance American interests,” Bessent said last month.
Reporter Choi Ji-seon [email protected]
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What are the potential impacts of Scott Bessent’s tax policies on the U.S. economy?
Time.news Interview: Understanding Economic Strategies Under Scott Bessent’s Treasury Leadership
Editor: Good afternoon, everyone! Today, we have a special guest to discuss the recent appointment of Scott Bessent as Secretary of the Treasury under President-elect Donald Trump. Joining us is Dr. Laura Chen, an economist and policy analyst specializing in tax reform and fiscal policy. Thank you for being here, Dr. Chen.
Dr. Chen: Thank you for having me! I’m excited to delve into this important topic.
Editor: Let’s start with Mr. Bessent’s promise to implement the tax cuts from the first Trump administration permanently. How significant do you think these tax policies will be for the U.S. economy?
Dr. Chen: Implementing permanent tax cuts could have a pronounced effect on consumer spending and business investment. When people see more take-home pay, they tend to spend more, which can stimulate economic growth. However, it’s important to be cautious about how these cuts affect the fiscal deficit.
Editor: That brings us to the “pay-fors” policy he mentioned. With tax cuts potentially increasing the deficit, how realistic is it to expect significant reductions in government spending, especially given the complexities of programs like the Inflation Reduction Act?
Dr. Chen: The challenge lies in balancing tax cuts with spending reductions. While reforming the IRA subsidies and other programs could free up funds, these changes could also face pushback from stakeholders benefiting from those programs, including green energy initiatives. Bessent’s approach will require a delicate balance to avoid adverse impacts on key growth sectors.
Editor: Speaking of sectors, Bessent hinted at reforms that could affect the electric vehicle subsidy system. How might this particular aspect influence the automotive industry, especially companies like Hyundai Motors and SK On?
Dr. Chen: The potential changes to EV subsidies could create uncertainty for automakers heavily invested in the U.S. market. If these subsidies are reduced or removed, it may slow consumer adoption of electric vehicles, ultimately impacting sales and the investments these companies have made to grow their electric vehicle offerings in the U.S. This could shift the competitive landscape among automakers as they adjust to new fiscal realities.
Editor: Fascinating insights! Now, let’s discuss the “3-3-3” strategy proposed by Trump, which aims to reduce the fiscal deficit to less than 3% of GDP. What challenges do you foresee in achieving these ambitious goals?
Dr. Chen: The goal of reducing the fiscal deficit from 6.4% to below 3% by 2028 is definitely ambitious, especially when considering rising expenses related to healthcare, social security, and interest on the national debt. It will require not just aggressive spending cuts but also sustained economic growth above 3%, which can be difficult to maintain. A proactive investment in infrastructure and education could help, but the political will must be there to support these initiatives.
Editor: You mentioned political will, and we know that economic policies can be divisive. What role do you see Congress playing in Bessent’s plans moving forward?
Dr. Chen: Congress will play a pivotal role in shaping and approving these policies. Bipartisanship may be necessary, especially if Bessent’s reforms encounter resistance. With various factions within Congress prioritizing different interests, building consensus will be crucial for success. If he can navigate those waters, he might be able to see his vision come to fruition.
Editor: Lastly, what do you think will be the most critical factor to watch in the coming months regarding these policies?
Dr. Chen: I believe the focus should be on how effectively the administration communicates its economic strategy to both Congress and the general public. Transparency and receptiveness to feedback can build trust and facilitate smoother implementation of these policies. Additionally, keeping an eye on labor market trends will be essential, as a strong labor market is crucial for supporting these growth initiatives.
Editor: Thank you, Dr. Chen, for your invaluable insights into Scott Bessent’s economic strategies. It will certainly be interesting to see how these plans unfold in the coming months.
Dr. Chen: Thank you for having me! I’m looking forward to how these developments will impact the economy and all sectors involved.
Editor: That’s a wrap on today’s interview! Stay tuned for more updates on economic policies and their implications.