Bessent’s 2025 Saw Powell and Argentina Rescues, Deficit Angst

From leading US trade negotiations with China and charting a course for the world’s biggest bond market to calming investors spooked by President Donald Trump’s most aggressive economic announcements, it’s been a busy 2025 for Scott Bessent.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — From leading US trade negotiations with China and charting a course for the world’s biggest bond market to calming investors spooked by President Donald Trump’s most aggressive economic announcements, it’s been a busy 2025 for Scott Bessent.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.While the Treasury secretary took office in January declaring “Main Street” as his priority, Wall Street can count some great rewards: Investors in the S&P 500 Index have earned a 17% return, Treasuries are up almost 6% and corporate bonds even more.Some of the stellar returns reflect relief that the worst didn’t happen. Trump reined in the extreme tariff rates he unveiled in early April that had fed fears of a recession — a decision credited in part to Bessent, who then emerged as one of the administration’s top trade negotiators.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.And by Trump’s own account, Bessent stayed his hand from attempting to remove Jerome Powell as Federal Reserve chair. Some investors warned any such move would damage the Treasury market, by heightening the risk of politically driven interest rate cuts that stoke inflation.After helping shepherd the president’s signature tax-cut legislation through Congress, Bessent claims a brightening in the outlook for economic growth. He also argues the administration’s tariff hikes have got the US fiscal trajectory heading in the right direction. Independent forecasters disagree.Here’s a look at a number of key metrics and developments from the former hedge fund manager’s initial year in charge of the Treasury.GDP GrowthBessent, 63, took office touting a “3-3-3” plan. That means generating 3% growth in gross domestic product, getting the government budget deficit down to 3% of GDP and boosting oil production by 3 million barrels a day. In July, he said on Bloomberg Television he expects 3-3-3 to be accomplished by the end of Trump’s term in office.Lately, he’s predicted that the US will “finish the year” with growth of 3% or 3.5%, without saying which exact measure he’s referencing, and then speed up to 4% in early 2026.The consensus forecast for 2025 is a 2% growth rate on a calendar-year basis, according to estimates compiled by Bloomberg. That would be the weakest since the Covid-hammered year 2020. Last year, the economy expanded 2.8%. The median projections are also for 2% for 2026 and 2027.Fed board members and reserve bank presidents, who last week submitted their own updated economic projections, also don’t see the US picking up to 3% growth. The highest forecast among that group of 19 — which includes Stephen Miran, Trump’s chief economist until he took a leave of absence to join the Board of Governors in September — is 2.6% for 2026 through 2028, Trump’s last full year in office.The Treasury didn’t respond to a request for comment on Bessent’s predictions, or other elements of his 2025 record.Budget DeficitAfter multiple years of deficits running in excess of 6% of GDP — a level rarely seen outside crisis times — Bessent has repeatedly trumpeted that the ratio dropped below that figure for the fiscal year through September.Indeed, using a Congressional Budget Office estimate for GDP for the July-through-September quarter, the gap came in at 5.8%, according to data compiled by Bloomberg.But some budget watchers caution the figures are flattered by a tightening in limits on student loans, which was enacted as part of Trump’s July tax law.Stripping that out, JPMorgan Chase & Co. analysts calculate, the actual deficit was more than $1.9 trillion — leaving it once again exceeding 6% of GDP. Jessica Riedl, a fellow at the Brookings Institution and adviser to past GOP presidential candidates, had a similar tally.By that math the administration failed to shrink the deficit even with a record $195 billion influx of tariff revenue. With the tax cuts widely forecast to damp revenue gains and further steep increases in spending on Social Security and Medicare unavoidable as the elderly US population expands, many forecasters warn federal finances remain on a dangerous trajectory.“Washington continues to push deficits to unsustainable levels, and there is no sign of the spending-and-tax-cut-spree letting up,” Riedl said. The FedThe Treasury chief typically serves as an administration’s chief point of contact for Fed matters, holding weekly meetings with the chair and playing a prominent role in the president’s selection of Fed candidates.Bessent, who regularly said monetary policy was a “jewel box” that must be kept inviolate from political interference, counseled Trump to avoid firing Powell — in the face of presidential ire over Fed policymakers failing to slash interest rates as he wanted.Nevertheless, Bessent in the latter part of 2025 agitated himself about the Fed’s monetary decisions. “Rates are too restrictive, they need to come down,” he told Fox Business in late September. “I’m a bit surprised that the chair hasn’t signaled that we have a destination before the end of the year of at least 100 to 150 basis points.”He has also blasted the Fed for having expanded its balance sheet via large-scale asset purchases, overreaching beyond its core mission of price stability and maximum employment. And he called for an independent review of the central bank, including its monetary policy functions. Powell’s term as chair ends in May. With Trump’s decision on a successor expected in the coming weeks, Bessent’s Fed record faces key tests in 2026.Bond MarketEarly in his tenure, Bessent said he and Trump would focus on the 10-year Treasury yield as the key borrowing cost to bring down, rather than the Fed’s overnight benchmark. By December, Bessent was crowing over Treasuries having their best year since 2020, with 10-year US yields falling even as counterparts in Germany, Japan and elsewhere were on the rise.Data also show that foreign investors continue to buy Treasuries, bucking a “sell America” narrative that erupted during the market chaos of early April, triggered by Trump’s tariff announcements.To be sure, at over 4%, 10-year yields remain well above their levels in the pre-pandemic decade — adding to the budget deficit thanks to higher interest payments. Still, thirty-year fixed-rate mortgages, which are tied to Treasuries, have come down more than half a percentage point this year to around 6.2%.QuickTake: Why the 10-Year Treasury Yield Is on Bessent’s MindFortifying ArgentinaWith the administration looking to support right-wing leaders across Latin America, Bessent played a key role in assembling financial support for Javier Milei when the Argentine president appeared to be at risk of a crushing setback in midterm elections.Bessent pledged to provide “all options for stabilization” in Argentine assets, and the US engaged in unusual direct intervention to prop up the peso. He arranged a $20 billion swap line, and market estimates indicated Washington spent well in excess of $1 billion in October to aid the Argentine currency. Milei’s party went on to win the vote, and the peso has largely stabilized.Energy ProductionWhile the Treasury chief doesn’t play much of a role in energy policy, Bessent’s final 3-3-3 metric — adding 3 million barrels of oil output a day — has shown some progress this year.The US has added about 700,000 barrels of oil since January, taking production up to a record 13.8 million, and maintaining the country’s position as the world’s biggest producer. The US also has added 1.2 million barrels a day of natural gas liquids and 12 million cubic feet of dry gas since January.Going ForwardLooking ahead, Bessent predicts Trump’s “golden age” for Americans will be realized in the coming years, with both Wall Street and Main Street doing well — in what he calls “parallel prosperity.”Voters aren’t buying that rhetoric for now, and Bessent’s prominent role could mean he shares the blame if data don’t move in his favor. 2026 beckons.—With assistance from Kevin Crowley and Nicolle Yapur.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.