Scott Bessent, President-elect Donald J. Trump’s Treasury secretary pick, defended tax cuts and tariff increases on Thursday, rebutting accusations from Democrats at his confirmation hearing that Mr. Trump’s policies would enrich the wealthiest Americans and hurt working families.
The clashes over the shifting direction of economic policy in the United States represented a preview of legislative fights to come this year as Mr. Trump prepares to enact blanket tariffs on imports and Republicans in Congress push to extend the tax cuts that they passed in 2017.
Mr. Bessent outlined a sharp break with the Biden administration during testimony before the Senate Finance Committee. He signaled a more confrontational approach with China and an intention to abandon a global tax agreement that the current Treasury Secretary, Janet L. Yellen, reached with more than 100 nations.
In his opening statement, Mr. Bessent said that Mr. Trump’s plans represented a “generational opportunity to unleash a new economic golden age that will create more jobs, wealth and prosperity for all Americans.”
A billionaire hedge fund manager with deep experience in financial markets, Mr. Bessent has been meeting with Senate Republicans and Democrats in recent weeks and is expected to have a relatively smooth confirmation process. But Democratic senators grilled Mr. Bessent on Mr. Trump’s plans, warning that they could stoke inflation and widen income inequality.
“Trump’s going to be waging this class war instead of fixing what’s broken about our tax system, which is that there’s a special set of rules that only applies to the ultrawealthy,” Senator Ron Wyden of Oregon, the top Democrat on the committee, said. “Mr. Bessent is a case in point.”
During the hearing, Mr. Bessent stuck closely to Mr. Trump’s preferred policies. He expressed reservations about the idea of an American central bank digital currency. He said that he would explore abandoning the debt limit if Mr. Trump called for it and that a U.S. sovereign wealth fund would be a smart way to generate more revenues for the federal government.
Although Mr. Bessent used to be a big donor to Democrats, it was clear on Thursday that he no longer supports many of their priorities. Asked by Senator Bernie Sanders, an independent from Vermont, about whether he supported increasing the federal minimum wage from $7.25 per hour, Mr. Bessent said: “No, sir.”
Mr. Bessent frequently played up his South Carolina roots and the fact that he owns farmland in North Dakota as he defused the implication from Democrats that he was part of the American oligarchy. He referred to himself as a rare Treasury secretary nominee who listens to farm radio on the weekends.
When pressed about contentious policy debates, such as tariffs, Mr. Bessent tried to offer perspective to show that the fallout would not be as bad as critics fear.
Mr. Bessent dismissed concerns from Democrats about Mr. Trump’s trade policy, suggesting that exporters from countries such as China would lower their prices in the face of higher U.S. tariffs. He reminded the lawmakers that President Biden left in place the tariffs that Mr. Trump enacted in his first term, but did little to enforce the trade commitment that China made in a 2020 trade deal.
Mr. Bessent described the Chinese economy as the most “unbalanced” in the world and said that, if confirmed, he would push China as soon as next week to start purchasing the U.S. farm products it promised to buy as part of that agreement. He also said that he would press his Chinese counterparts to buy additional products to make up for what the country was supposed to buy over the last four years.
As Treasury secretary, Mr. Bessent will oversee the vast U.S. sanctions program, and in this area he also laid out a hawkish approach. Mr. Bessent acknowledged that Mr. Trump is concerned that an overuse of sanctions could cause other nations to reduce their reliance on the dollar as the world’s reserve currency, but suggested that such penalties could be used more effectively.
Democrats expressed worry that Mr. Trump might ease sanctions on Russia, but Mr. Bessent said those penalties have been too weak. He suggested that Mr. Biden had not done enough out of concern that energy prices would go up, and added that if Mr. Trump wanted tougher sanctions as part of plan to end the war in Ukraine he would support that idea.
Mr. Bessent also struck a hard-line tone on Iran, making the case that a new era of American energy dominance would allow the United States to put more sanctions pressure on Iran’s oil sector and “Make Iran poor again.”
Taxes are likely to be the biggest part of Mr. Bessent’s portfolio this year, as he would help craft and implement tax policy if confirmed. He fielded several questions about the tax debate already underway in the Republican-led Congress.
Republicans are preparing legislation to extend many of the tax cuts they passed in 2017 during Mr. Trump’s first term. Without a new tax bill from Congress by the end of the year, measures like a larger standard deduction and lower individual rates will end, resulting in a tax increase for many Americans.
Mr. Bessent called the extension of the 2017 tax cuts the “single most important economic issue of the day” and warned that failing to extend the tax cuts would represent the “largest tax increase in history” on Americans.
Continuing the tax cuts is expected to cost more than $4 trillion over the next decade, according to the Congressional Budget Office, but Mr. Bessent brushed aside the fiscal consequences of lower taxes.
“We do not have a revenue problem in the United States of America,” he said. We have a spending problem.”
On some specific tax issues, like allowing companies to immediately write off the full cost of research expenses, Mr. Bessent said he would have to further study the issue. He said that he would seek to undo an international tax agreement aimed at stopping corporations from booking profits in low-tax countries.
The deal, which Ms. Yellen helped negotiate but the United States has not joined, includes a provision that could allow European nations to impose new taxes on American companies. That possibility has enraged Republicans.
Mr. Bessent’s own taxes emerged as a surprise issue during the hearing after a review of his tax returns by Democratic staff members showed that he had collected earnings from his hedge fund in a way that allowed him to avoid paying more than $900,000 in payroll taxes.
The I.R.S., an agency overseen by the Treasury Department, has in recent years sought to clamp down on the ability of hedge fund managers to avoid payroll taxes the way Mr. Bessent did. The Democratic staff members wrote in the memo that “Mr. Bessent’s position is counter to the position of the department he hopes to lead.”
At the hearing, Mr. Bessent said that he was “up to date” on his taxes and that the issue regarding his firm’s taxes is in “continuing litigation.”
The Biden administration fought to beef up the funding of the I.R.S. and invest billions of dollars to upgrade its technology and bolster its enforcement powers. Mr. Bessent suggested that he supported some of these policies, such as a direct file program that allows people to submit their taxes for free, and upgrades to its antiquated computer systems.
However, Mr. Bessent demurred when asked by Mr. Wyden whether the I.R.S. should be focused on cracking down on wealthy tax cheats.
“You seem to believe that the wealthy cheat more,” Mr. Bessent responded, suggesting that it was a premise that needed further study.
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