Bessent Predicts US Budget Deficit Will Approach 7% This Year
(Bloomberg) -- US Treasury Secretary Scott Bessent blamed Democrats for what he predicted will be another unusually large budget deficit this year.
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'What we are seeing here is a blowout in the spending,' Bessent said while answering questions at a House Ways and Means Committee hearing Wednesday. 'The last fiscal year is something we have never seen before. We have never seen a deficit to GDP this large' outside of wars, a pandemic or a recession, he said.
The deficit for the current tax year will come in between 6.5% and 6.7%, Bessent said. That would mark a third straight year in excess of 6% relative to GDP. The Treasury's 2024 fiscal-year figures showed a 6.4% deficit, after 6.2% in 2023. Fiscal years run through September.
'I find it very difficult to be lectured to by people who created the largest deficit in history,' Bessent said in a hearing that reprised partisan disputes over tax policy.
Democratic Representative Mike Thompson argued that the record showed previous Republican presidents' tax reductions had added to the US debt load. 'Every expert will tell you that the proposed Trump tax cuts will also add to our debt,' he said.
Bond Market
When presented with comments by fellow Republican Thomas Massie — a House member who voted against the GOP tax bill last month — about how US bond yields had climbed on concerns the legislation would add to American deficits, Bessent rejected that claim.
'Representative Massie doesn't understand the bond market,' said Bessent, a former hedge-fund manager. Looking at any 24-hour window of market activity 'is incorrect,' he said. Bessent flagged that, while German and Japanese 10-year government bond yields are higher now than at the start of the year, US ones are lower.
When Richard Neal — the top Democrat on the panel — said tax revenues are going up this year thanks to President Joe Biden's boost to the Internal Revenue Service budget, Bessent laughed. The Treasury chief said it was because, when he took office, he discovered antiquated IRS technology. He claimed Democrats' efforts had focused on boosting the ranks of IRS staff, rather than improvements to the agency's technology.
Bessent was also pressed on whether he could assure there would be no political influence over IRS audits. He said he would follow the law. Bessent also said, with regard to Harvard University, that he has had no conversations with President Donald Trump about its tax status.
(Updates with comment on the bond market in paragraphs after 'Bond Market' subheadline.)
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