Mike Crapo (00:00):
We have Senators Lujan, Sanders, Smith, Warnock, and Welch. We welcome you all to the committee as well. You all bring great expertise to the committee and we look forward to working with you. I'm also honored to lead this committee alongside Ranking Member Wyden. Senator Wyden and I have a proven track record of working together to improve the lives of our constituents in the Pacific Northwest and on this committee, and we can and will do so again in this Congress. I look forward to working with you, Senator Wyden. This committee's jurisdiction, tax, trade and healthcare policy reflects some of the most challenging matters that Congress confronts. The Finance Committee will continue its long tradition of addressing these matters in a manner that invites bipartisanship and delivers results to create opportunities for Americans.
(00:57)
Turning to today's hearing, let me extend a warm welcome to Mr. Scott Bessent, President Trump's nominee for the Secretary of the Treasury as well as his family. Congratulations Mr. Bessent on your well-deserved nomination and thank you for your willingness to serve and for your extensive cooperation with this committee. It has already been a great pleasure to work with you. You've been transparent, candid, and insightful with me and with my colleagues. You've spent countless hours meaningfully answering our questions and according yourself with great courtesy, dignity, and professionalism. Throughout the committee's rigorous vetting process, and I think that our Finance Committee has the most rigorous process of any committee in the Congress, you have worked tirelessly to meet our long-standing diligence standard.
(01:52)
It's clear that you followed applicable law and provided thousands of pages of documentation that substantiate your positions, positions supported by major law and accounting firms. Thank you for your transparency and responsiveness throughout the Finance Committee's exacting process and I look forward to continuing to work together with you. Mr. Bessent has worked for the last three decades as one of the sharpest minds in the global finance industry, including as an entrepreneur who started his own asset management firm. He taught economic history at Yale University, is a member of the Council on Foreign Relations, has served on the board of universities and nonprofits, and engages in a variety of philanthropic endeavors. Based upon your background, experience and character, President Trump made an excellent choice in nominating you to be a Secretary of Treasury.
(02:55)
As you have described it, the position for which you are nominated is at the heart of the American economy, which is in turn at the heart of global economic growth. A Treasury secretary heads the agency charged with supporting economic growth, representing US interests before foreign nations and global financial markets and organizations, managing the Federal Treasury and overseeing financial institutions, to name just a few of the responsibilities. Past successful Treasury secretaries have understood business and financial markets as well as foreign policy and national security, budgets, and regulation. They have worked collaboratively with Congress to enact the President's priorities. Additionally, they have been forthright and communicative.
(03:48)
The next Treasury secretary will have to work with Congress to preserve and build on the pro-growth Republican tax policies that have greatly benefited all Americans as well as improve our global competitiveness through trade deals that create market access and combat China's unfair practices. As seen in the results of our most recent election, American voters resoundingly support returning to the robust economy that we enjoyed during President Trump's first term. If you're confirmed, I look forward to working closely with you to achieve these and other essential aims. Mr. Bessent, on behalf of my colleagues, I thank you for your willingness to serve and again, congratulate you on your support and on your nomination, which I intend to support. With that, I recognize Ranking Member Wyden for his opening remarks.
Ron Wyden (04:42):
Thank you very much Mr. Chairman and I appreciate your introducing all the new members on both sides and as always, you're very kind comments about me. Very much appreciated. In a Trump economy, the winners circle is small and it's dominated by the ultra wealthy. Working people in the middle class are on the outside looking in and Trump and his advisors are indifferent to the problems they face each day. I've had more than 1100 open to all town hall meetings in my state. I'll have several more this weekend. The second word I hear from Oregonians in those meetings is almost always bill, grocery bill, medical bill, electricity bill. Americans feel held down by the cost of living. They look at the growing fortunes at the top and they weigh that against their sense that America's middle class just doesn't have the opportunities to really get ahead.
(05:58)
The American people voted for change and more than anywhere else, they want change in the economy. I don't believe they're going to get it from Mr. Bessent or Donald Trump. The centerpiece of the Trump economic agenda is extending his 2017 tax law at a cost of more than $4 trillion. Ultra wealthy individuals who rake in millions each year would get tax breaks of hundreds of thousands of dollars. Families who live paycheck to paycheck would be lucky if they could just get enough to cover the grocery bill for a week. How does Donald Trump and Republicans plan to pay for their multi-trillion dollar giveaways to the ultra wealthy? For starters, they'll be offering across the board tariffs, and let's be clear about what that's all about, trillions of dollars in new taxes paid for by working Americans and small businesses. And to me, the ultimate distillation of the Trump agenda is paying for tax breaks for the top by increasing child hunger, putting tens of millions off their health insurance, and laying off hundreds of thousands of manufacturing workers.
(07:25)
It feels to me like a class war on typical American families and the nominee, if confirmed, is going to be right in the middle of it. Donald Trump's going to be waging this class war instead of fixing what's broken about the tax code, which there's a special set of rules that apply only to the ultra wealthy. Make no mistake about it, those ultra wealthy people get to pay what they want when they want to and often little or nothing for years on end. Mr. Bessent is a case in point. The taxes that fund Medicare are automatic for the vast majority of Americans. They come straight out of every paycheck. It's a civic duty that pays off as earned benefits down the road, but like a number of Wall Street fund managers, Mr. Bessent makes use of a tricky legal maneuver to opt out of paying into Medicare. It's a tax loophole that hurts Medicare but benefits him to the tune of hundreds of thousands of dollars each year. Now the Treasury Department has gone to court to argue that taxpayers taking this position are violating tax law. Make no mistake about that. That's not me making the judgment. That's the Treasury Department. They went to court to argue that taxpayers who take this position are violating the law. I believe it's a big conflict of interest if the nominee is confirmed. Either he and his lawyers take the position that Treasury policy doesn't apply to the Treasury secretary or he blesses a loophole that lets Wall Street Titans blow off their fair share of Medicare taxes. This is exactly the kind of abusive scheme that leaves Americans feeling disgusted with the tax code. They feel it every spring when they go to file their taxes through the big software companies as well.
(09:36)
It's absurd that Americans get charged huge amounts of money to file their taxes every year. That's why a number of us in this room work hard to create the new direct file program with resources from the Inflation Reduction Act and the Biden administration. It's a free option that allows taxpayers to file their returns directly to the IRS, no software middlemen picking their pockets or harvesting their data. It launched last year to rave reviews and virtually nowhere in the western industrialized world do we have the kind of bureaucratic costly system we have today and we're trying to change it. 30 million Americans across 25 states are going to be eligible to use direct file this year. That's if it continues to survive. The software giants want direct file killed. Republicans are on their side, so maybe they're going to get their way.
(10:44)
If they do, it'll cost American taxpayers hundreds of millions of dollars this year alone. Trump and Republicans aren't stopping there when it comes to siding with special interests over the typical consumer. The Inflation Reduction Act was the largest investment in clean energy in our history. It was largely developed in this room and it took years to try to find the common ground around technological neutrality and the more you reduce carbon, the bigger your tax savings. It's created hundreds of thousands of jobs. It's saving consumers money on their energy bills, and along with record fossil fuel production, it's brought energy security to a level not seen in generations. Our country is in a clean energy arms race with China and other powers, but unfortunately, these policies from Donald Trump and Republicans may prevent us from winning that arms race with China. That's because the Trump administration is talking about selling out the special interests in far right ideologues that want to nuke the provisions of the IRA that help us promote clean energy.
(11:56)
They want to keep in place the oil and gas subsidies that have been around for more than a generation, but eliminate the incentives that put us in the lead on clean energy. From what I've read, that's how the nominee sees it as well. That would be a recipe for higher energy costs, weaker energy security and surrender to China when it comes to clean energy jobs and investment. In my view, that just defies common sense. I'll close with this. Many people, myself included, hope that the president-elect would pick a steady hand for Treasury's secretary, someone who would be a moderating force who'd work with all sides and especially for the interests of all Americans for a tax code that gives everybody in America the chance to get ahead, not just the people at the top. So this is an important discussion today and I wish I had read something that would indicate that this nominee would be the kind of Treasury secretary I described. That's why we have the hearing to get his views. Thank you, Senator Crapo.
Mike Crapo (13:03):
Thank you very much, Senator Wyden. And today, we are honored to have our good friend and colleague and now the new budget committee chairman, Senator Lindsey Graham to help introduce the nominee. Welcome Senator Graham from the great state of South Carolina. I want to thank you for joining us today and I'll turn it over to you to introduce Mr. Bessent.
Lindsey Graham (13:27):
Well thank you Mr. Chairman and the ranking member, to all my colleagues, and there are only 100 of us. We know each other pretty well. This is my first appearance in the finance committee, probably last. Y'all work on complicated stuff and I'm glad you like this stuff. It seems kind of boring to me, but it's important what you do and I respect the intellect of the people on this committee because our economy needs the best minds that we can find on the finance committee and we need a Secretary of Treasury that knows what he's doing, has the trust of the president, and loves his country. Your ship came in with this guy. So Scott Bessent is from South Carolina. He's academically gifted and real-world tested. He went to Yale, so nobody's perfect. When he told me that, I said, "I don't know about that." But anyway, he's really, really smart and this is a complicated area.
(14:29)
Now why am I here? Because Trump won. I wouldn't be here if Trump hadn't won. Trump won because more people voted for him and he had to pick people to form his cabinet. And when he talked about the Secretary of Treasury, I am not the normal person you would go to ask about because this is not so much my portfolio, but when he mentioned Scott, I said, "Oh my God, home run," from my point of view. I mean you talk about somebody who's academically gifted, understands the world. Any Republican president would pick Scott. I mean he really understands the president and what the president wants to do. And reason I vote for almost everybody for every president is I believe, colleagues, that every president serves a cabinet that they know and trust and can rely upon.
(15:34)
If I had to vote for people based on agreeing with them, I wouldn't vote for anybody y'all picked. That's not the standard for me. I vote for people who I disagree with because I think they're qualified. So I would just ask the committee to think for a minute, is this man qualified? Does he have the background and the intelligence and the character to serve President Trump and our nation's Secretary of Treasury? I think by any reasonable test of qualifications, he excels beyond the bare minimum to the highest level of excellence. But that's just my opinion. So my goal here today is to tell you a little bit about him.
(16:18)
You've heard from the chairman about his success in the financial world, about his academic qualifications. He was born in Little River, South Carolina. Why did they call it Little River? Because it's little and it's a river. It's in Horry County. How many of you heard of Myrtle Beach? Most of you. Well, this is somewhere between Conway and Myrtle Beach. At nine years old, his first job was to set up beach chairs and umbrellas in North Myrtle Beach. And apparently, you did well there because North Myrtle Beach is thriving. He went to North Myrtle Beach High School and he was voted most likely to succeed in 1980. And we have a high school classmate of his. What did they see in him? The same thing I see ,someone who really is talented and works hard and just a good person, the type of people that you think are going to succeed but you hope succeed.
(17:32)
So he lives in Charleston in a really nice place. Going from Little River to Charleston is about a two and a half hour drive, but it's a real change. Since I represent South Carolina, I like them both very much. He's married to John, his husband's right behind me, and they have two kids, Caroline and Cole, and they're absolutely adorable. And from a South Carolina point of view, we're really proud of Scott. I was over the top happy when President Trump picked him because I know him, I know where he came from. The rich and powerful don't live in Little River. This is truly the American dream. This man has been successful at everything he's ever tried to do. He's worked really hard. And why did President Trump pick him? Because he believes that President Trump's economic agenda is good for this country and he wants to help President Trump be successful. And here's what Scott said. "I think it's the melding of economic policy with national security, economic policy and national security are now indispensable, and Donald Trump understands that."
(18:54)
So I'm here to tell you folks, I agree with that. If we don't have energy independence, we're less safe. If we don't get our debt in order, we're less safe. I am known around here as kind of a national security guy, but I do understand economic policy matters. If you want to clean up the environment, a carbon fee seems to be a good way to do it to punish China and India for bad carbon practices. Call it a tariff, call it whatever you want to do. So President Trump won. I'm here today because he won. I'm here today because Scott lives in South Carolina. I'm here today to tell you if you use qualifications as your test, this is the easiest vote you'll ever take.
(19:41)
If your goal is to play like the election didn't happen, then I guess you'll vote no. That's just where we're headed in the Senate. When you lose an election, you get up and dust yourself off and you get ready for the next one. But I was honored when he asked me to introduce him because I know this man and America will be in good hands if he is our Secretary of Treasury. He deserves this job. He's qualified for this job. And President Trump, thank you for picking him, and behalf of all of us in South Carolina, we're extremely proud of you and we wish you well. Thank you.
Mike Crapo (20:24):
Thank you, Senator Graham. We appreciate you giving this introduction and you are now excused as is our practice. And Mr. Bessent, before we turn it over to you for your opening statement, I have four questions that we ask all nominees who come before this committee. The first is, is there anything that you are aware of in your background that might present a conflict of interest with the duties of the office to which you have been nominated?
Scott Bessent (20:55):
No sir.
Mike Crapo (20:57):
Second, do you know of any reason, personal or otherwise that would in any way prevent you from fully and honorably discharging the responsibilities of the office to which you've been nominated?
Scott Bessent (21:08):
No sir.
Mike Crapo (21:10):
Third, do you agree without reservation to respond to any reasonable summons to appear and testify before any duly constituted committee of the Congress if you are confirmed?
Scott Bessent (21:22):
Yes sir.
Mike Crapo (21:24):
And finally, do you commit to provide a prompt response in writing to any question addressed to you by any senator on this committee?
Scott Bessent (21:32):
Yes sir.
Mike Crapo (21:33):
Thank you very much. Again, welcome to the committee, Mr. Bessent, and you may make your opening statement.
Scott Bessent (21:39):
Thank you. Chairman Crapo, Ranking member Wyden, members of the finance committee, it's an honor and a privilege to be considered by this committee as the President's nominee for the Secretary of the Treasury. I want to thank all of you who took the time to meet with me over the past few weeks. I want to thank my spouse, John Freeman, who is here today and my wonderful children, Cole and Caroline, who were sitting behind me-
Mike Crapo (22:06):
Mr. Bessent, could you pull the microphone a little closer to you?
Scott Bessent (22:11):
Who were sitting behind me for the ultimate civics lesson. I want to acknowledge three people who couldn't be here today. My 98-year-old mother-in-law, Celine Freeman, a World War II French war bride of an American soldier who lives with us in Charleston, South Carolina, making for a three-generation household. My sister, Paige McLeod Bessent, who doesn't like crowds and prefers the mountains of South Carolina to large cities. And my recently deceased sister, Wynn Bessent, who worked tirelessly as a public defender in one of South Carolina's poorest counties.
(22:48)
I also want to thank President Donald Trump for having placed his trust and confidence in me for such an important role in his administration. While I've met with many of you, most Americans watching at home will be unfamiliar with my background. I have been blessed with a fulfilling and successful career, but my presence here today was far from predetermined. I was born and raised in the South Carolina rural country. My father fell into extreme financial difficulty when I was young. When I was nine years old, I started working two summer jobs and I haven't stopped working since. I eventually made my way to Yale. I accepted my first internship in finance because the job came with a pull-out sofa in the office to sleep on, which allowed me to live in New York City rent-free.
(23:41)
I've been involved in the financial markets ever since. I've been fortunate enough to work with some of the world's greatest investors in a career that has taken me to almost 60 countries over 40 years. My life has been the only in America story that I am determined to preserve for future generations. Today, I believe that President Trump has a generational opportunity to unleash a new economic golden age that will create more jobs, wealth and prosperity for all Americans. My life's work in the private sector has given me a deep understanding of the economy and markets. And while this experience will be invaluable in crafting economic policy, I have long adhered to the principle that you should know what you don't know and lean on those who do. Having never served in government, I intend, if confirmed, to be in close contact with each of you in your offices and seek your counsel.
(24:45)
The Treasury Department plays a critical role in protecting American national security. We must secure supply chains that are vulnerable to strategic competitors and we must carefully deploy sanctions as part of a whole-of-government approach To address our national security requirements and critically, critically, we must ensure that the US dollar remains the world's reserve currency. Today, Americans face significant challenges in an economy that has not created enough opportunities for working men and women. We have an affordability crisis, a housing shortage, and for the first time in my lifetime, parents feel as though the American dream is slipping away from their children. The federal government has a significant spending problem driving deficits that have averaged a historically high 7% of GDP during the past four years. We must work to get our fiscal house in order and adjust federal domestic discretionary spending that has grown by an astonishing 40% over the past four years.
(25:55)
Productive investment that grows the economy must be prioritized over wasteful spending that drives inflation. As we begin 2025, Americans are barreling towards an economic crisis at year-end. If Congress fails to act, Americans will face the largest tax increase in history, a crushing 4 trillion tax hike. We must make permanent the 2017 Tax Cuts and Jobs Act and implement new pro-growth policies to reduce the tax burden on American manufacturers, service workers, and seniors. I've already spoken with several members of the committee as well as leaders of the House about the best approach to achieving these important together. As President Trump has said, we will unleash the American economy by implementing pro-growth regulatory policies, reducing taxes, and unleashing American energy production. The breadth and depth of our capital markets along with predictable pro-growth tax policy, and smart updated regulation will continue to make America the most popular destination in the world for starting, growing and taking public a business.
(27:12)
And as we rebuild our economy and lay the foundation for the next generation of American competitiveness, we must use all the tools available to realign the economic system to better serve the interest of working Americans. For too long, our nation has allowed unfair distortions in the international trading system. President Trump was the first president in modern times to recognize the need to change our trade policy and stand up for American workers. If confirmed, I look forward to working with President Trump and members of this committee to do just that. Members of the committee, these are just some of many important goals that President Trump has laid out for me and others on his economic team. I firmly believe that if confirmed and with your counsel and support, we can usher in a new, more balanced era of prosperity that will lift up all Americans and rebuild communities and families across the country. I humbly thank you for your consideration and I'm eager to take your questions.
Mike Crapo (28:20):
Thank you, Mr. Bessent. Before I begin my questions, I want to re-emphasize how appreciative I am of your diligence in the process that we've gone through vetting here in this Senate. I appreciate the more than 3,000 pages that supporting material you've provided as well as the countless hours you and your staff have offered to respond to questions from members of this committee. Let me be clear. You followed all of the applicable law and met the committee's long-standing diligence standard. Your process matched that which has applied to nominees in every previous administration. I want to go in my first question to you, to the Tax Cuts and Jobs Act, which Senator Wyden and I have both mentioned already and you've mentioned in your remarks. The attack on this statute, this law, which is law, I remind everybody it is the law now, it was passed in 2017, is that it was a tax cut for the wealthy.
(29:23)
I appreciate you Mr. Bessent noting that it will be a four plus trillion dollars tax increase if we do not extend this law. And a point that I would remind all of my colleagues is that if that four plus trillion dollars tax increase happens, it's not just going to be something that impacts the wealthy, it is 2.6 trillion of it, the majority of it falls on people who make less, $400,000 for a family with two taxpayers, under $400,000 per year. That's the number that President Biden chose to say he wanted to protect it. 2.6 trillion of this tax cut hits those making less than $400,000.
(30:13)
Moreover, massive amounts of it hit pass-through entities, small businesses across this country. This is not a tax cut for the wealthy that we're talking about. It is a tax increase on all Americans, the majority of whom are in the lower and middle income categories. My question to you is one of our pivotal tax is to make sure that this tax increase does not happen. Can you give us your perspective on the impact that would occur in this country if we allowed this $4 trillion tax increase to happen?
Scott Bessent (30:54):
Senator Crapo, thank you for this and thank you for the meetings over the past few weeks. I've enjoyed working with your staff and this is the single most important economic issue of the day. This is pass-fail, that if we do not fix these tax cuts, if we do not renew and extend, then we will be facing an economic calamity. And as always, with financial instability, that falls on the middle and working class people. We will see a gigantic middle class tax increase. We will see the child tax credit halved. We will see the deductions halved, so it will be what we call in economics, it has the potential for a sudden stop, and as I said, traditionally with these sudden stops, it falls on working Americans.
Mike Crapo (32:01):
Thank you. And I would just say to you, you may be aware of this, but the tax foundation has indicated that if we do sustain these tax cuts and protect them from expiring and stop this tax increase, that the extension of this policy would increase the growth of the GDP in the United States by 1.1% over time. Similarly, and I don't know how they came up with the same number, but the National Association of Manufacturers indicates that if we don't extend this tax relief that there will be a 1.1% reduction in growth of jobs and development in our economy. It seems to me that as we are talking about what to do for America, that protecting America from a 1% reduction
Mike Crapo (33:00):
… versus a 1% growth in GDP is a critical objective. Could you just give a little bit of perspective, I know you've just answered this question in another context, but could you just give a little bit more perspective on those kinds of dynamics? And I'm sorry, I'm going to try to keep to five minutes, and we've only got about 15 seconds left of mine, and I want to be sure everybody else stays on time, so I will too. Could you quickly respond?
Scott Bessent (33:26):
Senator, I would just say that we saw the power of these tax cuts in '18, '19, and going into January of '20 before they were interrupted by COVID, and the great success that we had.
Mike Crapo (33:40):
Thank you. Senator Wyden?
Ron Wyden (33:43):
Thank you very much, Mr. Chairman. Let me say to the nominee, I've got four questions that I'm going to ask and if we both can keep it brief, I think we can get to all of them, because I think it really frames for us what the debate is all about. I'm going to start by talking about the future of Direct File. This is the program that helps our people who choose it to save hundreds of dollars when they file their tax return. Last year, the IRS launched it, it was enormously popular among taxpayers, but, of course, the tax software giants and their big lobby just hate it. They want to shut it down. Now, the filing season starts January 27, so it opens in 10 days, and millions of taxpayers around the country have already been notified that they are going to be eligible to use Direct File this year. So, I won't do this for every question, but I'd really like a yes or no on this one. Will you commit to keeping Direct File up and running if you're confirmed?
Scott Bessent (34:56):
I will commit that for this tax season, that Direct File will be operative, and the American taxpayers who choose to use it will. And if confirmed, I will consult and study the program, and understand it better, and make sure that it works to serve the IRS's three goals of collections, customer service, and privacy.
Ron Wyden (35:24):
I appreciate the answer. It means that taxpayers are going to save, who choose to use it, because it's voluntary, hundreds of dollars, and we'll have a chance to see once again how popular it is with practically everybody except the tax prep software crowd.
(35:41)
Onto tariffs. Donald Trump, with no plan and no strategy, says he's going to put across-the-board tariffs, blanket tariffs, on all imported goods, which means that our workers and our small businesses are going to get clobbered with additional taxes on practically everything they buy from other countries. My question here is who would pay these tariffs, Americans or foreign countries?
Scott Bessent (36:12):
So, Senator Wyden, just to understand, so I can frame the answer correctly, do you believe that these tariffs are a consumption tax increase?
Ron Wyden (36:28):
I believe these tariffs, you can call it whatever you want, in terms of trying to gussy it up, they're going to be paid for by our workers and small businesses. And all through the campaign we heard they weren't, that foreign countries were going to pay it. I think that's baloney. It's going to be paid for by workers and small businesses. So, your response?
Scott Bessent (36:48):
Yes, Senator, I would respectfully disagree. And the history of tariffs and tariff theory, optimal tariff theory, does not support what you're saying. Traditionally, we see that if we were to, say, use a number that has been thrown around in the press, of 10%, then traditionally, the currency appreciates by 4%, so the 10% is not passed through. Then we have various elasticities, consumer preferences may change. And finally, foreign manufacturers, especially China, especially China, which is trying to export their way out of their current economic malaise, they will continue cutting prices to maintain market share.
Ron Wyden (37:39):
Okay. That's an academic view of it, but what I know is the history of this is it clobbers people of modest means. They're the people who are going to get hit. And all through the campaign there was a big show that it was going to be paid for by foreigners; not so.
(37:56)
Two other questions that I want to get in. And I already made it clear, and you and I talked about this, I'm for a tax code that gives everybody the opportunity to get ahead. You and I talked about my friend Bill Bradley, he and I have been working for this for years. Do you believe the tax code should treat wages differently than it treats wealth?
Scott Bessent (38:23):
Look, in any tax system that advantages and creates distortions, it is a change that… Senator, it is a decision that was made when the tax codes were written. And so every tax codes involves the trade-offs and distortions in favor of other gains.
Ron Wyden (38:53):
It sounds to me like you do believe that it's fine to treat wealth more favorably. I couldn't disagree more. The idea that a dollar earned by a hedge fund manager has more value than a dollar earned by a teacher or a factory worker? I just think it's a disconnect with the American people.
(39:12)
One last question, and that is about the legislation that was written in this room that was the biggest transformation on clean energy in American history. That is our package that basically said the tax code, as it relates to energy, is a broken down mess. And we basically said we're going to have a technology neutral system. The more you reduce carbon, the bigger your tax savings. Now there is a big effort in the Trump administration to reverse it. I think that's going to be bad for the economy, but it is going to be damn good for China, because we are in an arms race on clean energy with them. Are you going to be on the side of people who want to unravel this?
Scott Bessent (39:52):
Senator? Senator Wyden? Just so we can frame this for everyone in the room, China will build 100 new coal plants this year. There is not a clean energy race. There is an energy race. China will build 10 nuclear plants this year. That is not solar. I am in favor of more nuclear plants. And I would note that the IRA, as scored by the CBO, is wildly out of control, in terms of spending on the upside.
Ron Wyden (40:28):
Well, first of all, the clean energy package does protect nuclear, because members on both sides of the aisle in this room wanted it to be that way. But if you're going to talk about fossils, the United States has achieved a greater level of energy security than we've had in generations, oil and gas production is at record highs. And it's not just that, but it's about clean energy, and I'm very troubled by your position denying that we're in an arms race with China on clean energy, because we definitely are. Thank you, Mr. Chairman.
Mike Crapo (40:57):
We do need to move on. And I told Senator Wyden he could have those four questions, but I want to remind everybody else we've got a five-minute time limit. He deserved those extra questions. Senator Grassley?
Chuck Grassley (41:09):
Mr. Bessent, congratulations. I want to start out with where you and I talked about something in my office, and you remember that tongue in cheek comment I made to you that you're going to be asked by the chairman, "Will you answer all of our letters?" And everybody that comes to the Hill says yes, they're going to. And I said maybe you better say "maybe", because most people don't keep that promise. So, I just wanted to remind you, if I write you a letter on my oversight responsibilities, I'd appreciate it if you'd answer it.
(41:45)
Now to my first question. My Democrat colleagues believe… You going to put that up? My Democrat colleagues believe the only solution to our unsustainable debt and deficit is higher tax rates, and that ends up being on job creators and families alike. However, history proves that high tax rates fail to raise significant revenues. Taxpayers, workers, and investors are smarter than that. In other words, they're smarter than we in Congress, that thinks that at one time a 93% marginal tax rate would bring in more revenue than a 70% tax rate, or a 50% tax rate, or a 30% tax rate, or a 40% tax rate, and so on. But as you can see from this card, Congress isn't too smart, because the taxpayers decide how much money they're going to bring into the federal treasury. Now on the other side of the ledger, federal spending is at levels we've never seen outside of war and recession, and still growing. So, I'm making a statement to you, but if you'd like to comment on whether or not we have a fiscal imbalance primarily, or a spending problem, rather than a revenue problem?
Scott Bessent (43:12):
Senator Grassley, I enjoyed visiting you in your office, and will remind you that when we were talking about the American agriculture that I may be the first Treasury secretary nominee in a long time who knows what a section is, 642 acres, and involved in the farming business. And yes, we do not have a revenue problem in the United States of America, we have a spending problem. That, historically, for the past 40 or 50 years, federal government revenues have averaged about 17 to 17.5% of GDP. And spending has been slightly over that, leading us to a 3.5% budget deficit, which is manageable, because we have roughly 3.8% nominal growth, 1.8% real growth, 2% inflation.
(44:10)
Today, as you stated, and to be clear, this is one of the things that got me out from behind my desk and my quiet life in this campaign, was the thought that this spending is out of control. We are spending about 24, 25% of GDP, so, as you said, 6.8 to 7% deficit. We have never seen this before when it is not a recession or not a war. And I am concerned, because several times, the Treasury of the United States has been called upon to save the nation. Whether it was the Civil War, the Great Depression, World War II, or the recent COVID epidemic, Treasury, along with full government and Congress, has used its borrowing capacity to save the Union, to save the world, and to save the American people. And what we currently have now, we would be hard-pressed to do same.
Chuck Grassley (45:19):
My last question is one I ask a lot of people that come from Treasury. While I oppose tax hikes on individuals, families, and small businesses, I've long championed sensible policies geared towards shutting down tax loopholes and providing tools to IRS to detect tax cheats. A primary example is my legislation that I authored in 2006, the IRS Whistleblower Law. It's brought $6 billion back into the federal treasury. This program could raise billions more if IRS would use it to its full potential. So, I hope I could count on you if you're confirmed, and I think you'll be confirmed, to be supportive of this whistleblower program, and work to ensure its full use to its full potential.
Scott Bessent (46:14):
Senator Grassley, we are in complete alignment on this program.
Mike Crapo (46:22):
Thank you. Next would be Senator Cornyn.
John Cornyn (46:28):
Thank you, Mr. Chairman. Mr. Bessent, welcome to Washington-
Speaker 1 (46:30):
[inaudible 00:46:31].
John Cornyn (46:31):
… D.C. You're getting a taste of what it's like here, which is an out-of-body experience for most people who are not acquainted with it. I happen to represent a state that has the eighth-largest economy in the world. We think we understand the formula for economic growth and prosperity and opportunity, which are low taxes, a reasonable and modest regulatory footprint, and opportunities for people to prosper, and by prospering, invest and create opportunities for other people to pursue their dreams. We think there's a lot Washington can learn from that formula. It sounds to me like you agree.
(47:15)
One of the strange experiences I've had here is that so many of our colleagues, principally on the other side, think that the money that you earn is not actually yours, it's the federal government's, and you just get to keep a little bit of it. Conversely, I believe that the money that people earn is theirs and they have a responsibility to pay taxes. But, as you point out, an over tax burden or large tax burden has a way of depressing the economy and reducing standard of living. So, I'm grateful for your nomination, and I think you are exactly the type of individual that needs to serve in this important position, and I support your nomination wholeheartedly.
(48:02)
Let me ask you, in the short time I have, one sort of obscure question, and another one that we discussed in our office. As you know, the market for US Treasuries is the largest market in the world. At $28 trillion, it's critical to the financial stability of the United States. There is actually a proposal for an entity to clear US Treasury futures at the London Clearing House, which is overseen by the Bank of England. Some argue that the Bank of England would have control over a, heaven forbid, a default scenario in this critical market instead of the US. Is this a concern to you?
Scott Bessent (48:47):
Senator Cornyn, I enjoyed visiting in your office, and I would note that while Texas has more arrivals, due to good economic policies, South Carolina has more arrivals as a percent of the population, also driven by our wonderful governor, Henry McMaster.
John Cornyn (49:06):
I'm still going to vote for your nomination. I think it's 1,600 people a day in Texas? But go ahead.
Scott Bessent (49:16):
Everything's bigger in Texas, sir. You raise a very important question, and one that I will investigate further. I was unaware, until the past few days of this, with the new exchange. What I can tell you is as a student, professor of economic history, that it is important for the US, for US Treasuries, for us to be able to resolve any stress issues in the market in the US. We saw during the Lehman Brothers bankruptcy that many of the problems emanated from the UK subsidiary. So, this is something that… Thank you for bringing this to my attention, and my inclination is that the resolution authority must lie here in the US, but I will get back to you in writing with an answer on this if confirmed.
John Cornyn (50:22):
Thank you. You appropriately mentioned China is one of our biggest challenges. And while I believe in free and fair trade, we know that some countries, principally the PRC and the Chinese Communist Party, don't play by the rules. Over the years, by some estimates, US investments in Chinese companies have totaled $2.3 trillion in market value. That was at the of 2020. That included $21 billion, these are American companies investing in China, $21 billion in semiconductors, $54 billion in military companies, and $221 billion in artificial intelligence. So, it's pretty clear to me that US investments have fueled China's economic growth, which has allowed them not only an increased standard of living, which is great for the Chinese people, but problematically, it's also allowed them to modernize their military, and now threaten the peace in the Indo-Pacific and beyond.
(51:26)
As we discussed, I've introduced a bill that would require transparency of American companies investing in China and, of course, the entity that would receive the reports from American companies that do that, and since it's strictly a reporting requirement, would be Treasury. What's your view of an outbound investment transparency requirement?
Scott Bessent (51:50):
Senator Cornyn, I believe that, as we discussed in your office, this is a very important issue. That the Chinese economy is the most imbalanced, unbalanced economy in the history of the world. They're using their surpluses to fund their military machine. In China, and I'm not going to try the Mandarin pronunciation, for the sake of everyone in the room, but there is a phrase that is two words, "Military, industrial." And military always comes first. So, we should understand that. And that we should have a very rigorous screening process for, as you identified, anything that could be used in AI, in quantum computing, in surveillance, in chips. That the US has the lead, and we must make sure that we maintain it through smart policies, such as you and I discussed.
John Cornyn (52:56):
Thank you.
Mike Crapo (52:56):
We need to move on. Senator Bennett?
Michael Bennet (52:59):
Mr. Bessent, thank you for being here. Mr. Chairman, congratulations on your position. We look forward to working with you as always I have. Mr. Bessent, thank you for your willingness to serve. We are at the beginning of what's going to be a vigorous conversation about the country's fiscal health. You've described our deficit as alarming, and yet you're here with the same Trump tax policy that has burdened the American people with another $2 trillion of debt that their kids and grandkids are going to have to pay back. And despite the conversation we've heard over here, clearly the distribution of it was deeply, deeply, deeply unfair. 50% of it went to the top 5% of Americans, 75% of it, if you add the SALT, which even the Wall Street Journal won't support, because it's so unbelievably outrageous, will go to the wealthiest 5% of Americans.
(53:58)
The tax policy is one that's hard… For some reason, in this room, it makes sense to people. In America, I don't think there's been a mayor in the history of the United States whose tax policy has been to go to the people of New York City, or of Atlantic City, or even of Mar-a-Lago, and said to them, "I have an idea. I'm going to borrow more money than we have ever borrowed in the history of that community, and I'm going to spend it." And I would say, "Well, geez, I'm worried about that. I don't want us to borrow a bunch of money without knowing what it's going for. What is it going for? Is it going for schools?" "No." "Is it going to compete with the Chinese in their defense?" "No." "Is it going to pay for parks?" "No." "Is it going to deal with the mental health crisis that we have in America?" "No." "Is it going to pay to secure our border?" "No." What are you doing with the money, Mr. Bessent? What were you doing with the money, Mr. Mnuchin? What are you doing with the money, mayor in America?
(54:56)
The answer is we are going to give it to the richest people in America, the richest people in our community, and expect that somehow that's going to trickle down to everybody else. That has been the Trump tax policy since the day he showed up, and no mayor in America would ever, with a straight face, say that's what they should do! And in fact, no America in history has done that. But to add insult to injury, you sit here, and Mr. Mnuchin sat here at his time and said, "It's all going to be paid for by economic growth." We know that's not true. We know it cost $2 trillion. So, while the benefit went to the richest people in America, the cost is being borne by the children of working people all over this country. And that's what's going to happen now. It's $4.6 trillion this time, not $2 trillion.
(55:49)
And then you come here, and this is my question, Mr. Bessent, and you sneak into your opening statement that we have a spending problem and what we have to focus on, as you said, is discretionary spending, after your crocodile tears about how China is out-competing us. And as you know, because you're a smart person, and you've spent a lot of time on Wall Street, just like your predecessor did, discretionary spending is about a third of our overall spending. 17% of what we spend is domestic. 17%, roughly, of what we spend is military spending, that spending you were talking about with respect to China.
(56:34)
There are so many things I think you owe the American people after we have seen the catastrophe of the result from the tax cuts the last time, and the fact that the benefits went to the wealthiest people. But don't you at least owe the American people a refund for the $2 trillion that they've already incurred because of the last round, before you get to the $4.6 trillion? Can't we think of a better idea in this, the halls here, than cutting taxes for the wealthiest people, and expecting that it will trickle down to everybody else, when we have the profound needs that you have talked about, when we're living in an economy… You had the American Dream, we heard you say that, where fewer and fewer people can get ahead, where this generation of Americans is going to be the first generation to leave less opportunity, not more to our kids and our grandkids? Where we see massive income inequality and wealth inequality when Trump was president, when Biden was president? Can't we think of a better idea than that?
(57:36)
And at a bare minimum, and this is tiny, don't we owe them an answer about what you are going to do to that 17% of discretionary spending, or even the third, before you come in here and say that the most important thing we should do is cut taxes for the richest people in America?
Scott Bessent (58:01):
Senator, thank you. And I would respectfully disagree with much of your categorization, in terms of the benefits accruing to the richest Americans. Actually, the share of taxes paid by the upper percent of Americans increased after TCJA. It went from 39 to 46%. The top 50% of Americans now pay 98% of taxes, and working families had real wage increases in 2018 and 2019, and going into 2020 pre-COVID. The CBO scoring for the Trump tax cuts got re-scored by 1.5 trillion.
Michael Bennet (58:50):
Make sure, because we're in the beginning of a long debate, that if you're going to rely on the CBO score for this, that you're going to be willing to rely on it for the things that you've said it's no good.
Scott Bessent (59:02):
Look, I'm not in love with CBO scoring.
Michael Bennet (59:05):
I know that. That's why now you're relying on it. So, I'm just saying, let's not-
Scott Bessent (59:09):
It's a language we all speak.
Michael Bennet (59:10):
It's not funny money. This is the American people's money. We can do math. Every mayor in America has to do math. And we're going to insist that you do the math too, because we know George Soros understands the math when you worked there, and you understand full well what's going on here, just like Steve Mnuchin did, just like Donald Trump does, and we're not going to let it happen again to the American people. Thank you, Mr. Chairman.
Mike Crapo (59:35):
Thank you. And I again remind my colleagues we need to hold our time to five minutes. Senator Cassidy?
Bill Cassidy (59:43):
Mr. Bessent, I'm always going to pronounce your name as if it was in South Louisiana and I'm going to pronounce it with a French Bessent, as opposed to Bessent. That's what those folks in South Carolina do. I'll try. Let me compliment you on substantive answers. Sometimes we get people here who just rope-a-dope and they'll have a set of statements such as has been just delivered, in all due respect to my colleague, and they just rope-a-dope, and you actually give substantive answers. I thank you for that.
(01:00:07)
By the way, Lindsey Graham alluded to it, going back to tariffs, which Senator Wyden spoke of, I've been very concerned that countries like China manipulate environmental regulations. You point out that they're building 100 coal-fired plants over a period of time, and that whatever we do will not have an impact on global greenhouse gas emissions because China's putting up so many. I believe I've learned that that is called an externality in economics. When we met, we discussed the farm pollution fee, which would put a levy, a tariff on those carbon-intensive products coming from countries like China roughly commensurate with their avoided cost of not controlling it. Now, I would think that my Democratic colleagues would like that, because that's clearly a way that they are manipulating the world economy to steal jobs from the United States, and simultaneously increase global greenhouse gas emissions. Any comments on such a foreign pollution fee?
Scott Bessent (01:01:09):
Senator Cassidy, I greatly enjoyed our discussion, and the extensive presentation you gave me when I visited with you. And this is a very good question, and I believe it is one for your Democratic colleagues to understand whether they would be in favor of the equivalent of a carbon tariff. That Senator Graham is in favor of it, and I think this is a very interesting idea, that it could be part of a entire tariff program, because I think… President Trump hasn't taken office yet, but if confirmed, I look forward to working with him on various strategies, some that could be specifically aimed toward carbon, as you say, others that could be aimed toward unfair trade practices, unfair financing practices.
Bill Cassidy (01:02:11):
So, if you will, there's externalities that a tariff can address. Those externalities, in and of themselves, hurt the pocketbook or the job prospects of an average American. Let me move on, I think you would agree with that.
(01:02:23)
I applaud your goal to get our debt-to-GDP ratio down to 3%, our percent of our GDP down to 3%. But you studiously say that we can't talk about things like Social Security, and I think that's because routinely, if we talk about Social Security, we presume that there's going to be a cut in benefit to our raise in taxes. I think we spoke when we met, I and others have a bipartisan plan that would create a pension investment fund, separate from the Social Security Trust Fund, and that just like we do with our 401(k)s, invest it in the broader economy, and use the proceeds from that to offset the upcoming 25% cut in Social Security benefits that will occur if we don't address this problem.
(01:03:12)
And just so folks get that, under current law, when the Social Security program goes unsolved in eight years, per CBO, there'll be a 25% cut in benefits. Under the plan I and others have endorsed, it's a pension investment fund, in which we again would invest in the broader economy, with all the safeguards to keep the government from interfering. I mention that because it seemed that other advisors to the incoming president have spoken of creating an investment fund to benefit. Mr. Lutnick, I think, has, Mr. Paulson did on the campaign trail. What are your thoughts about that concept? I think they spoke about it as sovereign wealth, I'm speaking about it as a fund to bail out Social. By the way, all risk borne by the fund, none of the risk borne by the beneficiary. She would get her scheduled benefits. What are your thoughts on that?
Scott Bessent (01:04:00):
So, Senator Cassidy, first of all, I want to emphasize that President Trump has said that Social Security and Medicare will not be touched, and I believe-
Bill Cassidy (01:04:12):
But I'm saying touch in a positive way. Not cut benefits, not raise taxes, indeed increase benefits, and take that 25% cut off the table, just to make that clear.
Scott Bessent (01:04:22):
No, I understand. And those would not be touched. One of the tragedies of this blowout in the budget deficit is that we have to get our short-term house in order to start, before we can start implementing the smart plans such as yours. I do believe that there is discussion to leverage the asset side of the US balance sheet, as we discussed in your office, in favor of a fund, whether it's a sovereign wealth fund, something as you discussed, a supplemental fund. So, that is very much in the mix. I look forward to getting back to you on it. President Trump hasn't taken office yet. If confirmed, this is something that I think could be very exciting, because we always look at the debt of the United States, and we have fantastic assets that could be earning, leveraged, or used for multiple revenue-generating opportunities.
Bill Cassidy (01:05:43):
Thank you, I yield.
Mike Crapo (01:05:43):
Thank you. Senator Warner?
Mark Warner (01:05:46):
Thank you, Mr. Chairman, congratulations. Mr. Bessent, it's good to see you, and enjoyed our meeting. I've got some specific questions I want to ask, and I don't want to litigate this now, but I do feel,
Mr. Warner (01:06:00):
…as someone working with Senator Crapo and others when we took on, I still think the most comprehensive [inaudible 01:06:07], Simpson-Bowles and we took arrows from each side. And I'm looking at any kind of pro-growth policies possible, but I just respectfully want to say there is not an industrial nation, first world industrial nation in the world that gets anywhere close to meeting their revenue needs. And I'm not proposing that America spend anywhere like the Europeans at 17 to 18% of GDP. It's never happened historically. It's not going to happen in a Trump administration or future democratic administrations. So we'll have a time to talk back and forth on this, but I can't let some of this go without at least offering something that there's not an economist around that wouldn't concur. We got to bring down spend, but the revenue side alone is not… Excluding that we're never going to get to a balance.
(01:06:58)
I do want to raise on a more positive note, again something I worked closely with the chairman on and actually worked with your predecessor on and was very proud of that relationship. I disagreed with Secretary Mnuchin on a lot of things, but I found a lot of things to agree with him on. And one was a relatively narrow part of the financial sector called community development financial institutions, CDFIs. Under the previous Trump administration we put about $12 billion in, this serves access to capital for underserved communities.
(01:07:28)
Under Senator Crapo's leadership, we built a bipartisan CDFI caucus, 12Ds, 12Rs. It's tough to get 24 bipartisan senators agree on anything. It's kind of low-hanging fruit. There are things we can do to continue to expand this area, creating a secondary market. We've got some bipartisan legislation there trying to reward patient capital. A lot of these institutions now have tier one equity, but they've got to get patient capital. And again, Senator Crapo and I've worked with the current administration, would want to work with yours on something called the Economic Opportunity Coalition. But can you say a word or two about how you view CDFIs and this making sure that underserved communities get the access to capital so they can have their own American dream. How that fits into your lexicon.
Scott Bessent (01:08:16):
Senator Warner, I enjoyed talking to you about CDFIs in your office. The early part of my career was as a financial services analyst, so I have a depth and breadth and I believe that the breadth of the US financial services industry is what makes the US economy differentiates the US economy from the rest of the world. And I think the addition of these CDFIs into underserved communities are very important.
Mr. Warner (01:08:53):
Well, I appreciate that. And again, it's bipartisan and there are, again, you understand markets well, if we could spark a secondary market in this debt, if we could leverage, and I'm talking about private capital and I know that's what my colleagues like a lot, private capital, but we can leverage it exponentially.
(01:09:12)
One of the things we discussed, and again we talked about this in my office and I don't want to… One of the things I was happy to hear, I feel very strongly that we cannot reward Vladimir Putin's aggressive, outrageous behavior in Ukraine. And I think the Ukrainians have performed remarkably, obviously they have manpower issues. I see this from the intel side on a daily basis. One of the areas that I think we have not done as well, and candidly the sanctions regime, I don't think was as effective as it should have been. And I frankly think the Biden administration waited too late to put some of these additional sanctions on oil and tankers. The ability to rush it to retool… Listen, I hope if President Trump can settle this, hallelujah, the world would be better off. But one of the things we discussed in my office with the potential to actually increase the sanctions regime as a way to help further leverage that, would you care to talk for a moment about that again?
Scott Bessent (01:10:21):
Yes. So Senator Warner, I believe that the sanctions regime especially… Well first of all, I would say in my adult life that the tragedy going on in Ukraine is one of the greatest tragedies of my adult life and ending that as soon as possible, an entering role that Treasury can play in that if confirmed, I would like to do. As we discussed, I believe that the sanctions were not fulsome enough. I believe that the previous administration was worried about raising US energy prices during an election season. And I am perplexed to see that National Security Adviser Sullivan on his way out the door is raising the sanctions level on Russian oil companies. And indeed the oil prices in the US are up about 9% this month.
(01:11:36)
So what was good for that administration is being foisted on us, but having gone from I think low-level sanctions to mid-level, that if any officials in the Russian Federation are watching this confirmation hearing, they should know that if I'm confirmed and if President Trump requests and as part of his strategy to end the Ukraine war, that I will be 100% on board for taking sanctions up, especially on the Russian oil majors to levels that would bring the Russian Federation to the table.
Mr. Warner (01:12:20):
And I will only take 30 seconds. Let me just get 30 seconds. Thank you for that because I think it's important that we don't take these tools out of the toolkit. We can litigate what the past administration did and when they did it, but increasing pressure on Putin to bring about a resolution. I very much appreciate your willingness and I hope you will be an advocate for keeping those sanctions on and actually advancing them even further. Thank you, Mr. Chair.
Speaker 2 (01:12:44):
Senator Warner. Senator Lankford.
Mr. Lankford (01:12:47):
Thank you Mr. Chairman. Mr. Bessent, good to see you again. Thanks for the time in the office to be able to talk through a lot of these details as well. I was interested to be able to hear your statistic. You shared earlier that after the tax cuts and jobs after 2017, now we've had several years to be able to see what happens. And now I believe the statistic you gave is the top 50% of earners in America now paying 98% of the taxes. Did I hear that correctly? Because I've heard over and over again that is only the wealthy, only the big companies that get it. I would encourage quite frankly, every Oklahoma company that's a small business to ask their CPA this year when they're filing their taxes, what if the tax cuts and jobs acts expires next year? What would my taxes be next year?
(01:13:29)
And have small business owners ask that question of their CPA and I think they will be quite surprised based on all the rhetoric to say this is only about big companies and wealthy people that every small business will quickly find out, oh, it's them as well. It'd be the same thing on the child tax credit. If Tax Cuts and Jobs Act goes away, it gets cut in half in the child tax credit and all the inversions that were happening under the Obama administration where American companies were being bought up by foreign entities, now that's actually switched. Now American companies are buying foreign companies and those jobs are coming here. So there's been a tremendous amount of benefit in that. The one challenge that we've had on this committee has been a conversation with Janet Yellen about Pillar Two. And it started really four years ago now, three years ago, where the conversation was about, well we really don't need Congress to act on this. We feel like we can do unilaterally, we can change America's tax policy for all businesses in America.
(01:14:25)
And now in the last year they've shifted to say, well, we're going to have to come back to you at some point to be able to get this. In the meantime, a deal has been negotiated that literally helps European countries and hurts the United States on this. And they negotiated a deal that exempts China from being affected by this at all. My question to you is are you going to engage on this issue of Pillar Two? Number one, have this committee involved in writing taxes which seems to be consistent with the constitution and then what is your message to other countries if they try to implement Pillar Two on American businesses?
Scott Bessent (01:15:01):
Thank you, Senator. As we discussed in your office, Senator Lankford, that I believe that any, especially European country, but any country that in the next few days before President Trump takes office, his intent on implementing Pillar Two will find it a grave mistake. That the taxation of US companies is a sovereign issue and that authority lies with this Congress and I will respect that. I will work with you to undo what I think has been a terrible policy.
Mr. Lankford (01:15:43):
Which I would agree and many members in this committee would agree that not only they went around Congress violating the Constitution, but it deliberately hurt American companies. And I just think that's really terrible policy on it. It truly was America's last policy.
(01:15:57)
On the energy side, you talked a lot about energy production, but I'm Oklahoma and unashamedly. We're all the above and all the below energy. We probably have more wind in hydro and solar production in my state than any other state on this dais with very few exceptions. But we also use oil and gas and we're going to produce all the energy that our state needs to be able to make sure that we stay stable on that. One of the issues that is a business issue for small or large businesses that I've been fighting for is a stable bonus depreciation amount. This is not about the type of energy or the type of business even, it's if you're actually investing in your company and trying to grow your company that you would know what that bonus depreciation. Now this will help with pipeline productions, but it will also help a pet shop and a hair salon and a restaurant just as much as well. And so thoughts on bonus depreciation and just a stable rate for that?
Scott Bessent (01:16:54):
So Senator Lankford, you're referring to the 100% immediate-
Mr. Lankford (01:16:58):
Yes, what has been in the past, but for quite frankly a stable rate period. Right now we have a diminishing rate that's unpredictable.
Scott Bessent (01:17:05):
Yes. So I think that increasing the after-tax return on capital for US companies, especially small business is one of the greatest forms of job creation that we could see. And to go back to your point on energy production, we've heard much here today saying that we are at a record amount of energy production and we know that's a canard. We are barely above where we were in 2020 and if we were to look at the Department of Energy projections for 2024 and 2025, we are well below those. The past four years we have seen US production constrained and part of a fulsome sanctions program would mean that we need more energy production in the US to make up for the loss of sanctioned Russian oil to protect the US consumer.
Mr. Lankford (01:17:59):
Right, which is American jobs, which is American income, which is one of the things we're going to have to deal with as the intangible drilling cost punishment that was actually put on all the independent oil and gas companies in my state and everywhere else that drives up the cost for consumers as well. That's another issue that this committee needs to take on. Mr. Chairman, thank you.
Speaker 2 (01:18:15):
Thank you. Senator Hassan.
Ms. Hassan (01:18:17):
Well thank you Mr. Chairman, and again, congratulations on your position.
Speaker 2 (01:18:19):
Thank you.
Ms. Hassan (01:18:20):
I look forward to working with you and all of our colleagues on the committee. And thank you Mr. Bessent for being here. Congratulations on your nomination and for your willingness to serve and welcome to your husband and children as well. We are grateful for their willingness to share you with the country. I appreciate you meeting with me in this process and sharing your priorities at Treasury if you are confirmed and I want to follow up on some of those topics today. I also just want to associate myself with the comments of my colleague, Senator Bennett and Senator Warner. I certainly believe we need to cut taxes for working people and we need to make sure the wealthiest pay their fair share. And with regard to Senator Warner's comments on sanctions, you mentioned if Vladimir Putin is watching this hearing, he's not the only one watching this hearing. China is watching this hearing and we have talked about the importance of making sure that we are not only competitive but outperforming China for economic purposes as well as for national security reasons.
(01:19:23)
And as important as a resolution in Ukraine is, history tells us that appeasing tyrants at the expense of freedom fighters never works. And it is critically important not only for the Ukrainian people and for the freedom of all of us, but it is important because China and North Korea are also watching what we do and watching this hearing and how we will go forward imposing sanctions. To turn to some of the topics that we discussed when we met in my office, the research and development tax deduction was one of them. It's critical to helping us outcompete countries like China. Currently, China provides a 200% super deduction for R&D, while American businesses can only immediately deduct 10% for R&D. I've worked with Senator Young on a bipartisan effort to restore the full and immediate R&D deduction. So do you support restoring the full and immediate R&D deduction where you work with me and my colleagues to get this across the finish line in Congress?
Scott Bessent (01:20:24):
Senator, I enjoyed the meeting in your office. I am not fully versed in this, but my inclination is that this is something that I would support and I will get back to you if confirmed. I will get back to you very quickly on it and we'll make it a priority.
Ms. Hassan (01:20:43):
Do you agree it's an important tool for American companies to improve their competitiveness?
Scott Bessent (01:20:50):
Yes, Senator.
Ms. Hassan (01:20:51):
Thank you. One of my other top priorities is working on a bipartisan basis to lower costs for families. Under President- elect Trump's policies, do you believe that prices for families will go up or down?
Scott Bessent (01:21:05):
I believe that inflation will be much closer to the Federal Reserve's target of 2% and I believe that what we have seen over the past few years is that the bottom two income quintiles have a very different basket of goods and services. So there are two ways, we can either lower cost or we can get real wages up. I would hope that we would be able to do both.
Ms. Hassan (01:21:34):
So you believe that President Trump's policies will further increase wages and lower inflation?
Scott Bessent (01:21:43):
I believe that they will increase real wages and lower inflation closer to the Federal Reserve's 2% target as it did during President Trump's first administration.
Ms. Hassan (01:21:54):
Are there any specific policies proposed by the President-elect that you expect will increase prices for families?
Scott Bessent (01:22:03):
Nothing I can immediately think of.
Ms. Hassan (01:22:05):
So that's a no. If the President-elect were to propose a policy that you believe will increase prices, would you advise against it?
Scott Bessent (01:22:14):
I would speak to President Trump about it. It is his decision and I believe that we think that if we look back that it is a complete composite return in terms of aggregate inflation numbers and I think it's very difficult to-
Ms. Hassan (01:22:36):
Well, I have limited time. So if you believe that a policy that is proposed by President Trump would increase prices, would you advise him against doing it? Yes or no?
Scott Bessent (01:22:50):
I can't answer that question because it's a hypothetical.
Ms. Hassan (01:22:54):
All right, let's move on to when we met prior to the hearing, you told me that President Biden was responsible for increased prices over the past four years. Something we can litigate, but I don't want to right here. By the same token, I assume you would agree that if prices increase in the next four years, President-elect Trump would be responsible?
Scott Bessent (01:23:13):
I think there could be a variety of reasons. I think that it could be… We will see the policies of the Federal Reserve, the spending policies, Congress sets the spending policies.
Ms. Hassan (01:23:26):
So look, I'm going to cut to the chase because I'm out of time, but at the end of the day, what you're articulating is a double standard and it's disappointing to me. Thank you, Mr. Chair.
Speaker 2 (01:23:37):
Thank you. Senator Daines.
Mr. Daines (01:23:39):
Chairman, thank you. Mr. Bessent, good to have you here this morning. I think we're seeing here in this committee is we really do have a divide between two very different philosophies about how to go forward and what's best for the American people in this economy, what's best for global competitiveness. I remember sitting right in this chamber as we were debating whether or not we should launch the multiple trillion dollars massive spending bills, which was a $2 trillion COVID bill, the Inflation Reduction Act, massive multi-trillion dollar bills that even Democrat former secretaries of Treasury said could be inflationary. And indeed it was. You compare that outcome to what we are going to return back to the policies of the prior Trump administration that when you lower taxes for businesses and the American people, you create more tax revenue, you create more economic activity, you create more wage growth, particularly for minorities as well, and you start to get back into winning in terms of global competitiveness.
(01:24:43)
We stop the inversions. It was absolutely like boom, went from multiple inversion to zero once we moved forward with this. And I couldn't be prouder of what we did boldly back during the Trump administration. We tried to fight against during this administration, these massive out of control spending bills that were inflationary and the American people suffer greatly with these high levels of inflation, higher mortgage rates and so forth. And so I'm glad to have you as our next Secretary of Treasury, work with you to restore sanity back to where we were under President Trump. Congratulations on your nomination, your willingness to serve.
(01:25:21)
With the expiration coming of these tax rates facing a $4.3 trillion tax increase if we don't act this year. As we begin drafting this bill and I applaud Chairman Crapo. He brought us together as ranking member last year prior to getting the majority back, anticipating we might have this moment. And we started talking about what are some key themes. Then we got into the details over several months of working groups for this next tax bill to renew and protect, preserve the tax rates and prevent a $4 trillion tax increase. One of the keywords was permanency. Permanency.
(01:26:04)
I've expressed my support for the use of current policy baseline. I've expressed my support for permanency because we add uncertainty here in Congress with expiring tax code provisions. It's time to make them permanent, to take one additional burden away from the American people wondering what's going to happen with Congress, whether my tax rates will depend on what happens in the next election or what happens if Congress can act. Let's take that off the table with permanency. My question Mr. Bessent is, you've said we need to grow our way out of our current economic situation. I couldn't agree more. And that's just the philosophical divide we face here. Somebody who embraces more the supply side idea, reduce rates, unleash capital into the free markets and let those markets decide where that investment lies versus a bunch of bureaucrats here in Washington with wasteful spending. How does permanency and certainty of the tax code affect our ability to grow out of these problems?
Scott Bessent (01:27:06):
Senator Daines, I've enjoyed getting to know you over the past year with your work on the National Republican Senate Committee and talking to you in your office and also discussing your history in the private sector, both of the big company and small companies. And a question like that makes it clear to me that you understand the incentives, that it is incentives that drive everything in tax policy.
(01:27:36)
And I can tell you that since November 5th for small businesses, we have seen the biggest increase in optimism since they have been keeping the metrics. So certainty, small business owners, many of whom they are passed through corporations believe that we will get the tax TCJ across the line. I think we could see a bigger increase in optimism. In economics when we have something we can't define, we call it animal spirits. And I think we are seeing animal spirits, a nascent move up, but permanency and forward guidance gives people certainty. We get capital and investment, we get hiring, we get real wages. Employers want to keep, train and expand their workforce so everyone wins with permanency certainty. A kind of forward guidance for tax policy I think would be one of the things that could unleash this new golden age that President Trump has talked about.
Mr. Daines (01:28:51):
Yeah, I want to make one statement. I know I'm out of time here, Mr. Chairman, but when you take a look at the private sector jobs in America, there's about 140 million private sector jobs. 88 million of those jobs are from pass through entities. That's about 63%, which tells me that… And that's the part that's expiring. I mean the corporate rates are staying permanent. It's the pass through rates, those 88 million jobs, 63% of the private sector jobs are taking a look at what's going to happen here in Washington over the course of the next six to eight months. Very, very important we make these rates permanent and prevent a tsunami of $4.3 trillion tax increase that will come if we don't act. Thank you, Mr. Bessent.
Speaker 2 (01:29:33):
Thank you. Senator Cortez Masto.
Ms. Cortez Masto (01:29:36):
Thank you, Mr. Chairman. Mr. Bessent, good to see you. Thank you for meeting with me. Welcome to your family as well. Let me ask you this. I'm going to talk a little bit about the ACA premium tax credits. Over 80,000 of my constituents in Nevada receive that premium tax credit to assist them in affording their healthcare coverage. And on average these credits lower in American's health insurance costs by $ 530 per month. Congress provided an enhanced PTC in 2021, but that policy expires this year and without the enhanced PTC in place, millions of Americans are going to lose their health coverage. So as the person most responsible for tax policy in the incoming administration, would you commit to opposing any attempt to remove or not renew these credits?
Scott Bessent (01:30:26):
Senator, as we discussed it in your office and as has just been a brief time since we met, I committed to you that I would research this. I have not had time to do it before this hearing, but if confirmed, I would get back to you with all deliberate speed in investigating this.
Ms. Cortez Masto (01:30:48):
Thank you, I appreciate that. And let me just say you would agree that these tax credits, because they're current policy, they actually extend current tax policy costs. Excuse me, that you agree that extending current tax policy actually costs money?
Scott Bessent (01:31:07):
Again, I think I don't understand the nuance of that question, but I will get back to you on it.
Ms. Cortez Masto (01:31:12):
Okay, I appreciate that. You have been supportive of many of President Trump's tariff plans and I have heard the conversation there. So I am not going to go into that. And we've talked a little bit about it in my office, but let me jump back to these credits that were imposed that some of my colleagues are against, but they have benefited Nevada, and I want to talk to you a little bit about it. The 45X manufacturing tax credit supports thousands of jobs in the Reno area and billions in investment across my state. It also is key to reducing dependence on China for the critical minerals we need for our military and supports mining jobs in Nevada. We are a mining state, we are mining critical minerals. And so will you commit to opposing any effort to repeal or reduce the 45X tax credit, which is not just a benefit in Nevada, it's a benefit in other states as well, including Alaska?
Scott Bessent (01:32:11):
So again, Senator, I am unfamiliar with that exact provision, but I do believe that it is important for us to mine, accumulate and move to domestic production for rare earths and other vital minerals. So I will get back to you on my thoughts on that exact program, but on an atmospheric meta basis, I agree with the direction of travel.
Ms. Cortez Masto (01:32:43):
Thank you. Let me ask you this. We also talked about this. President Trump has stated that he thinks that a president should have influence over the decisions of the Federal Reserve. And we discussed this in my office and I appreciate that opportunity. Does it continue to be your view that the Federal Reserve should be independent of the President?
Scott Bessent (01:33:09):
Of course. And I actually believe that the notion that President Trump believes he should have influence, there was I believe a highly inaccurate Wall Street Journal article saying that he believed something to the effect of he should be in the room. President Trump is going to make his views known as many senators did. Three senators including two on this committee called for… There was a jumbo rate cut in September of 50 basis points. Two of the senators on this committee called for 70-
Ms. Cortez Masto (01:33:44):
I'm not asking my senator colleagues. I get the politics on their sides. I'm asking you. But let me just say, you don't deviate from our conversation that you think that there should be independence.
Scott Bessent (01:33:54):
I think on monetary policy decisions, the FOMC should be independent.
Ms. Cortez Masto (01:33:59):
Thank you, I appreciate that. And then for the benefit of our colleagues, what you're referring to earlier is in our meeting I asked you if there were any regulations, Treasury regulations that currently exist that you disagree with and in response and a continuing in response right now, you're saying you're going to look into it and get back to me, is that right?
Scott Bessent (01:34:19):
Well look, I believe as we saw, I don't know if it's a regulation, but it's a policy. As we saw from the December 8th hack by some Chinese entities into the Treasury, which was very serious, that that was through a work from home software app. So one of the policies that I support, I intend to be in the building every day that I am in Washington and I support a return to the office, which is against the current Treasury policy.
Ms. Cortez Masto (01:34:55):
Right, and I appreciate that. If there are any others that you pose and you can share with me, it doesn't have to be right now, get back to me. I appreciate that.
Scott Bessent (01:35:02):
Of course. I'm happy to provide that in writing.
Ms. Cortez Masto (01:35:05):
All right, thank you. Thank you so much. Thank you, Mr. Chairman.
Speaker 2 (01:35:07):
Thank you. Senator Young.
Mr. Young (01:35:11):
Mr. Bessent, good to see you. Congratulations again on your nomination to this important position and thank you for your willingness to serve our country. I'll tell you what I'm looking for in a Treasury Secretary. I'm looking for someone who has a clear record of professional accomplishment. A distinguished academic record would be a bonus. You have those things. I'm looking for someone who is thoughtful. What I care less about is the performative dimension of the job, I have to tell you. So there's a lot of chatter in Washington about that, but I do appreciate your thoughtful answers here this morning.
(01:35:52)
So I'm going to dive in and begin by asking you about dimension of your role as Treasury Secretary. You'll inherit the role of chair on the Committee on Foreign Investment in the United States, also known as CFIUS, that reviews foreign investments in American industries. And very recently, President Biden blocked Nippon Steel's acquisition of US steel on national security grounds. Yet he and the administration provided no clear substantiated evidence, publicly at least, to justify this decision. For my home state, this abrupt action has instilled a lot of anxiety, particularly in the Gary, Indiana area where there's nearly $1 billion in investments that were promised. If the Nippon US steel deal were to reappear before CFIUS, sir, do you commit today to an impartial review, particularly when political pressure was initially permitted to overshadow an honest assessment of national security vulnerabilities?
Scott Bessent (01:37:15):
Senator Young, thank you for the question. And I understand the imperative for jobs for your constituents in Indiana. President Trump most recently has also spoken out against the deal, but if the deal is--
Mr. Young (01:37:34):
The statute indicates that you are charged with providing impartial reviews. That's all I'm asking. Would you be following that law or not, sir?
Scott Bessent (01:37:47):
Impartial reviews, sure. So it is currently in litigation, the review is closed, but if it reappears, CFIUS will conduct the same review that it always does. Yes, sir.
Mr. Young (01:38:03):
Okay. Well, thank you. We may have an opportunity to work together on that effort. Mr. Bessent, your nomination comes at a time when tariffs are central to our economic debates, particularly on issues like inflation, supply chain, resilience and job creation. Now I believe that in moderation, tariffs for a time strengthen America's negotiating leverage with other nations and they can strengthen certain national security-relevant industries. But overuse of tariffs can inflate costs and provoke trade retaliation. As Hoosier farmers have experienced firsthand over the years, they often bear the impact of these retaliatory measures, leaving already thin margins much more vulnerable. What concrete steps would you take
Mr. Young (01:39:00):
… to shield these Indiana producers if major trading partners impose steep duties, and how do you envision the Treasury Department's role in supporting them?
Scott Bessent (01:39:11):
Thank you, Senator Young. As I mentioned before, and I may have mentioned it when I was in your office, our family is involved in the farming business, in soybeans and corn, so I'm very sensitive to this and very up to date. The American farmers have been very loyal, 90% of rural voters voted for President Trump. So they should know that their interests are his interests. And when you ask what I would do specifically, I have said recently the Biden administration kept on all of the Trump tariffs, but what they did not do in the agreement with China was enforce the purchase provisions. So next week, if confirmed, I would begin pushing for the purchase guarantees that were in the China agreement to be enforced, and perhaps push the Chinese for a catch-up provision over the past four years.
Mr. Young (01:40:21):
Just a quick follow up. In terms of the application of tariffs, a skilled negotiator might sometimes use broad tariffs to gain leverage, and then in other cases, a more sector specific approach could be effective. What criteria or perhaps benchmarks would you use to inform your decision, to go with across-the-board measures or more surgical tariffs? Do you believe there should be any built-in caps or triggers to prevent an unintended escalation?
Scott Bessent (01:41:00):
So Senator, I haven't been confirmed yet President Trump isn't in office, but I would imagine that the American people should think about tariffs in three ways under the Trump administration. One will be for remedying unfair trade practices, either by industry or country, a la the Chinese tariffs, the steel. Two may be for a more generalized tariff as a revenue raiser for the federal budget. And three, president Trump, I think has added a third use of tariffs, as you said, as a skilled negotiator to… He believes that we've probably gotten over our skis of it on sanctions, and that sanctions may be driving countries out of the use of the US dollar. So the tariffs can be used for negotiations, whether it's for Mexico on the fentanyl crisis. So I think you and the American people should think about those three broad categories.
Mr. Young (01:42:15):
Thank you, sir.
Mike Crapo (01:42:15):
Thank you, and we need to move on. And next is Senator Sanders. Senator Sanders, I don't believe you were here when I welcomed everyone to the committee this morning, but as a new member of the committee, I personally welcome you and look forward to working with you.
Senator Sanders (01:42:30):
Thank you very much and it's a pleasure to be here. Mr. Bessent, thanks very much for being in the office the other day. Mr. Bessent, the United States today has more income and wealth inequality than has ever existed in the history of our country. You got three people on top, Mr. Musk, Mr. Bezos, and Mr. Zuckerberg who are now worth almost a trillion dollars. That is more than half of the bottom of our society, some 170 million people. Three people more wealth than the bottom 170 million. We have more concentration of ownership today than we have ever had. We have more concentration of ownership in the media, where a handful of billionaires like Musk, Bezos, Rupert Murdoch increasingly own the media and the information that the American people receive.
(01:43:28)
We have a corrupt campaign finance system in which a small number of billionaires in both political parties make huge contributions into the presidential and congressional campaigns. When you have a small number of multi-billionaires who have enormous economic media and political power, would you agree with President Biden who last night stated, and I quote, " An oligarchy is taking shape in America of extreme wealth, power, and influence that threatens our entire democracy, our basic rights and freedoms." That's what President Biden said last night. I agree with him. Do you?
Scott Bessent (01:44:18):
Senator Sanders, I enjoyed our visit-
Senator Sanders (01:44:21):
Can you talk a little bit closer into the mic?
Scott Bessent (01:44:22):
I enjoyed our visit and I hope you got my follow-up materials on the discussions, my previous writings on the tariffs and China. And look, the three billionaires who you listed all made the money themselves. Mr. Musk came to the country as an immigrant. Jeff Bezos-
Senator Sanders (01:44:47):
I understand that, but what I'm asking you is when you have a handful of people like Musk who will soon be part of the Trump administration, and others, when you have three people owning more wealth than the bottom half of American society, when these people have enormous influence over the media, when they spend huge amounts of money in both political parties to elect candidates, what Biden said last night is we're moving toward an oligarchy. I'm asking you that question. Forget how they made their money. Do you think that when so few people have so much wealth and so much economic and political power, that that is an oligarchic form of society?
Scott Bessent (01:45:28):
Well, I would note that President Biden gave the presidential medal of freedom to two people who I think would qualify for his oligarchs. So-
Senator Sanders (01:45:40):
This is not a condemnation of any one individual. I'm just asking you, when so few people have so much wealth and power, do you think that that is an oligarchic form of society?
Scott Bessent (01:45:54):
Senator, I think it depends on the ability to move up and down the-
Senator Sanders (01:46:01):
No, that's not really the answer. Even if you had that mobility, no matter who those individuals might be. All right, but let me ask you another question. Right now in America we have over 22 million workers who are making less than $15 an hour and nearly 40 million people in our country earning less than $17 an hour. Shamefully the federal minimum wage, despite the efforts of myself and other people here, have not been raised since 2009 and remains an unbelievable $7.25 an hour. Will you work with those of us who want to raise the federal minimum wage to a living wage to take millions of Americans out of poverty?
Scott Bessent (01:46:49):
Senator, I believe that the minimum wage is more of a statewide and regional issue.
Senator Sanders (01:46:55):
So you don't think we should change the federal minimum wage of $7.25 an hour?
Scott Bessent (01:47:00):
No, sir.
Senator Sanders (01:47:00):
Okay. Mr. Bessent, millions of working-class Americans who are struggling to keep their heads above water are paying outrageously high interest rates on their credit cards. Over half the American people who take out new credit cards are being charged interest rates of over 24%. 24%. During his campaign, President-elect Trump promised that he was going to cap credit card interest rates at 10%. I happen to think that that is a very good idea, and I will soon be introducing legislation to do just that. Will you, if you are confirmed, be supportive of what President-elect Trump said and what I want to see happen? And that is to cap credit card interest rates at 10%.
Scott Bessent (01:47:50):
Senator, I think we can both agree that many credit card companies have been bad actors throughout history, and I will get back to you once [inaudible 01:48:02]-
Senator Sanders (01:48:02):
Very simple question. Trump said he wants the cap credit card interest rates at 10%. I agree with him. Will you be supportive of what Trump and I would like to do?
Scott Bessent (01:48:12):
When President Trump takes office, and if I'm confirmed, I will follow what President Trump wants to do.
Senator Sanders (01:48:17):
Okay, thank you very much, Mr. Chairman.
Mike Crapo (01:48:19):
Thank you very much. Next is Senator Smith.
Senator Smith (01:48:24):
Thank you very much, Mr. Chair and Ranking Member, and great to be a part of this committee. I appreciate it very much. And welcome Mr. Bessent. It's nice to see you again. I want to follow up a bit on the conversation that we had yesterday and just get into a little bit more detail in actually some of the issues that Senator Sanders is raising. I'm focused on how we can lower costs for Americans and how we can make this economy work better for regular people in this country. And when we spoke yesterday, we talked generally about this. And you have said that you think our biggest challenge is to get after the deficit, and you've also said that your first priority is to extend the Republican Trump tax cuts, which would add $4.6 trillion to the federal deficit. And you've also said that the Trump Republican tax cuts have generated economic growth and that those benefits have trickled down to everyone else.
(01:49:20)
But what I see is that these Republican tax cuts have delivered massive consolidation of wealth at the top. Almost half of those benefits went to the top 5%. The top 1% got a tax cut that was 852 times bigger than the one that was received by the lowest earning working families in this country. And now these wealthy people have more money than they know what to do with. You see Elon Musk buying Twitter and now he's got an office in the old executive office building and a seat on the platform when the president is inaugurated, and these tech billionaires are launching rockets into space and building themselves these lavish doomsday bunkers, buying up newspapers, all of which gives them more power. So what I want to ask you is it seems to me that this concentration of wealth is not good for our country and it is certainly not doing anything to lower prices for working families in Minnesota or help them afford a home or child care. In fact, it seems like it's doing the opposite of that. So could you comment on this?
Scott Bessent (01:50:25):
Yes, and Senator Smith, I believe that President Trump, and if confirmed myself, are committed to addressing this affordability crisis. And part of the affordability crisis stems from this great inflation that we've had since… It was nascent in 2021, it occurred in '22, '23. We are still substantially above target. My hope is that we will not see it accelerating again. And inflation is one of the great killers for working families. As we talked about in your office, the CPI or PCE, the statistical numbers may be up about 20, 22% under the previous administration, but the basket of goods and services for working families. So getting inflation down, getting interest rates down and addressing this affordability crisis-
Senator Smith (01:51:29):
Yeah. And as you know, inflation is coming down. And one of the things that I think we saw during the course of the last couple of years was these big consolidated corporations with so much market power jacking up their prices way beyond the amount of money that they would've had to have raise their prices in order to cover their costs. So in my view, this level of corporate consolidation is actually hurting Americans. It is hurting the price, it's costing people more, and that in fact the Republican Trump tax bill, that there's such a move to reinstate or to extend, is going to contribute to that problem, not make it better. But let me ask you another question. You've also said that in order to get our fiscal house in order, we need to cut spending, we need to deregulate and we need to privatize.
(01:52:21)
So I want to just look at what we are seeing with some privatizing in the private sector that is of great concern to me. Let's look at healthcare. We've seen a move by big corporate investors into healthcare and especially hospitals. Terrible stories we've heard about rural hospitals and clinics getting shuttered, maternity wards getting shut down, and caused in part by this private equity, big corporation purchasing and moving in and controlling, again, concentration in healthcare. And none of this, of course has lowered costs for Americans. In fact, the opposite. People's costs have spiked. So I wonder, do you see this kind of model of big corporate takeovers of healthcare actually helping to lower costs for Americans?
Scott Bessent (01:53:07):
Senator Smith, I probably had trying to understand healthcare costs and the drivers of that on my to-do list for 10 years to be able to sit in a room for a week and understand this and I've never been able to do it. But I will tell you that when we see things like healthcare, like higher education, both of which have substantially outperformed any inflation index by cost, there is a problem there. I think that what you are identifying could be one of the problems, but I think the overall level of healthcare costs that we're seeing is driven by a multifactor-
Senator Smith (01:53:59):
It is a complicated issue, and I know I'm out of time, Mr. Chair, but what I see, and we've done work on this when Chair Sanders was chair of the health committee. These big corporations come in, the quality of care goes down, patient costs go up. There's a hospital in Massachusetts that was bought up by one of these big firms and they stopped stocking a common treatment for hemorrhage during pregnancy and they've seen patients die. So again, I think this is an example of how privatizing is not a solution to our problems in healthcare or other parts of our economy. Thank you, Mr. Chair.
Mike Crapo (01:54:33):
Thank you. Senator Johnson.
Senator Johnson (01:54:33):
Thank you, Mr. Chairman. Mr. Bessent, welcome. Thank you for your willingness to serve. I want to just start by refuting one of the false narratives we hear ad nauseam from the other side that the Tax Cut and Jobs Act was the primary cause of our deficit. It's just not true. So I'm going to actually use the facts. From CBO… Again, this isn't to confirm CBO numbers. This actually shows you why we ought to take CBO projections with a grain of salt. After its passage, CBO projected 10 years, but for seven years that we just experienced, total revenue of $27 trillion. Actual revenue was $28.7 trillion. To do the math, that's $1.7 trillion more than what CBO estimated, which shows that the original story was 1.5 trillion in lost revenue.
(01:55:19)
So we not only paid for the tax cut in seven years, we generated $200 billion more revenue even with the COVID recession. So again, we need to take CBO scores with real grain of salt. But I hope this committee understands what Senator Graham was talking about in terms of your humble beginnings, and you're a tremendous American success story. So I want to ask you a hypothetical, because you understand American families. If an American family, let's say they normally spend $100,000, have a serious health crisis. And so in one year they have to spend $50,000 on medical bills, but then fortunately that family member gets well, what would that family spend the next year? Just real quick.
Scott Bessent (01:56:13):
Unless they have more income, they'd spend the same-
Senator Johnson (01:56:17):
Probably $100,000.
Scott Bessent (01:56:17):
They'd spend the same 100 and probably have debt costs associated with that,
Senator Johnson (01:56:22):
Right? They certainly wouldn't do what the federal government has done. In 2019, before the pandemic, we spent $4.4 trillion. In 2020 we spent 6.5, $6.6 trillion. When the pandemic ended, we didn't really reduce spending. For the last five years, we've averaged $6.5 trillion, last year spending $6.9 trillion. Mr. Bessent, is there any justification for keeping spending levels at this level?
Scott Bessent (01:56:52):
Senator Johnson, as I've said repeatedly, the United States does not have a revenue problem, we have a spending problem.
Senator Johnson (01:57:00):
We have a spending problem. So the question is how do we reset spending levels to a reasonable pre-pandemic level? I wrote a column in the Wall Street Journal, I laid out a couple of scenarios, and let me just give you the guts of it. If you take one of the pre-pandemic years and increase all the spending by population and inflation, by the way, that's what families would do as well. But you exempt Social Security, Medicare, and interest and use President Biden's 2025 budget, because you spend… What we plan on spending this year.
(01:57:33)
If you take Bill Clinton's 1998 spending, I don't think he spent too little back in 1998, we would be having a baseline of 5.5 trillion. If you took President Obama's 2014 spending levels, it'd be 6.2 trillion. The one I like the best though is if we use President Trump's 2021 budget, his estimates for spending in 2025 and again, just use those numbers, but slot in Social Security, Medicare, and interest as they are, nobody's touching those, we'd be spending about $6 trillion. So wouldn't that be a reasonable level, somewhere between 5.5 and $6 trillion as a baseline spending to project our next 10 years?
Scott Bessent (01:58:22):
Senator, I look forward to working with you on this, that you've clearly done more work than I have. And this looks like a very good starting point to me to figure out how we've gotten into this spending morass.
Senator Johnson (01:58:38):
So it sounds like pretty reasonable approach to me. By the way, I'd take 1998, I'd use Clinton's spending levels for this. I also want to refute this current CBO score on extending the TCGA. Back then they scored the whole thing as $1.5 trillion. If you just inflate that the same way, according to CPI, it'd be $2 trillion. How do they justify a score of 4.3 to $4.6 trillion? It makes no sense. So again, I think we need to take those estimates with a huge grain of salt. My final point, I heard the Ranking Member talk about inflation in the cost of living. Because we've incurred these massive deficits, a 1998 dollar today is only worth 51 cents. A 2014 dollar today is only worth 74 cents. A 2019 dollar is only worth 80 cents. That was caused by this massive deficit spending, the devaluation of the dollar, and a lot of devaluations occurred over the last four years because we spent too much money. Not because we didn't tax America enough, it's because we spent way too much money. Thank you, Mr. Chairman.
Mike Crapo (01:59:49):
Thank you. Senator Cantwell.
Senator Cantwell (01:59:52):
Thank you so much, Mr. Chairman. Mr. Besant, congratulations on your nomination. And I see your family sitting there in earnest on these economic issues. It's so interesting. Our perspectives, you can see from this committee, are arguing about what we think are the right economic policies for the country. And as the Treasury nominee with your background and experience, we still are talking about the president's policies and whether we think they're effective or not. Real GDP has increased at an annual rate of 3.1% in the third quarter of 2024. That's strong growth, right?
Scott Bessent (02:00:40):
As an aggregate number, it's strong growth.
Senator Cantwell (02:00:42):
Okay. The economy added 16 million jobs over the last four years and average unemployment rate is the lowest it's been in 50 years. So that's led to better pay and working conditions. We want that, right?
Scott Bessent (02:00:54):
I'm in favor of better pay and working conditions. Yes, Senator.
Senator Cantwell (02:00:58):
And after-tax income increased by 400%. So these are good economic news. And I personally think that focusing on innovation and building supply chains is a good thing to do. And so when you start talking about tariffs, that's when you get the Pacific Northwest's attention. In fact, I would say a recent editorial by one of my newspapers was bracing for the Trump tariffs, aviation in general. You can imagine we actually have an actual net surplus. I think we export about $2 billion worth of goods out of our state versus importing $1 billion, but this is a big part of it. And so in the aviation sector, I think I sent you an article about the fact that we think increasing our manufacturing innovation to continue to have markets and sell to those markets is a good economic strategy.
Scott Bessent (02:02:02):
Senator Cantwell, as I discussed in your office, that in my hometown of Charleston, South Carolina, Boeing is also the largest employer. So I view aviation as very important.
Senator Cantwell (02:02:14):
Great. So now I want to… This is, and believe me, I would have the same conversation with Joe Biden or Barack Obama or whoever. So I want to focus on innovation, not the tariffs. I'm worried that the tariffs are going to increase supply chain products, they're going to increase prices on our farmers, they're going to increase prices on Americans. And so I want to ask you, don't you think we are in an environment where exporting products in growing markets outside the United States is a big economic opportunity? And what are you going to do to build coalitions to help us be able to achieve opening up those markets as opposed to just the retaliatory tariff environment, which may raise costs on Americans and not resolve these issues?
Scott Bessent (02:03:12):
Senator Cantwell, thank you for that. And after our discussion in your office, I actually went back and looked at some older data. In 2000 in terms of the labor share of aggregate income in the US, 69% accrued to labor. Today, that number is 60, and you could see a sharp drop after what is called the China shock. So I agree with you that opening markets is good, but free trade must be also balanced against fair trade. And clearly what has happened is the trade has not been fair. That has fallen on the American workers, and we cannot allow… As I think I mentioned to you, China is the most unbalanced economy in the history of the world. They are in a severe recession/depression, they may have minus 4% disinflation, and they are attempting to export their way out of that as opposed to doing the much needed internal rebalance. So I am with you on the need to open markets, but we cannot allow a player like this to flood our markets or to flood the world.
Senator Cantwell (02:04:45):
But I am saying I believe in coalitions. We just discussed a technology NATO. I think you thought that was a good idea. The notion though… I can get upset with my colleagues on the other aisle all the time and object, but that doesn't move me forward. And so I hope that you will look at what we're going to do to build allies. These numbers that basically are talking about just the tariff and what it would do to the price of gasoline given Canada is concerning. And so I want to know that the Trump administration is going to focus as much on innovating our way to success as we are on the tariffs, because I do think we're going to see retaliatory tariffs. We saw them in our state. It hurt us in our agriculture.
(02:05:32)
And what happened is that you lose more farms. There's a lot of people buying farmland, Goldman Sachs, Bill Gates, there's a lot of people buying farmland. But we're losing in the middle of the trade wars and that's a concern I have. Thank you, Mr. Chairman. And oh, by the way, thank you so much for mentioning housing. I so appreciate that that was in your statement. I look forward to working with you. I do think that's an area, if the President will push forward, that it is a way for us to lower costs. Thank you.
Mike Crapo (02:06:00):
Thank you, Senator Lujan.
Senator Lujan (02:06:02):
Thank you, Mr. Chairman. Good to be with you, Mr. Bessent. Thank you and your family for being with us today. I very much appreciated the conversation we had in the office. Now I'm going to touch on several topics, so I'm going to ask you some yes or no questions. And I thank you in advance for your brevity. It may surprise many observing today, the immense responsibility that the Secretary of Treasury has in stemming the flow of fentanyl and other substances. Now, yes or no, will you commit to continuing the Biden Administration's Counter-Fentanyl Strike Force, which brought together the Office of Terrorism and Financial Intelligence and IRS Criminal Investigation to fight financial crime?
Scott Bessent (02:06:46):
Thank you, Senator. I enjoyed our visit. And as I mentioned in your office, this is personal for me as two families who are close to our family, lost children to the fentanyl crisis. So I will commit and know that it is my belief that President Trump is laser-focused on this issue.
Senator Lujan (02:07:09):
Mr. Bessent, yes or no, will you work with me to ensure that there's more transparency over suspicious activity reports, SARs, at the Financial Crimes Network for Congress?
Scott Bessent (02:07:23):
I believe, as you and I discussed, there is a sleeve of Treasury called TFI, Terrorism Finance that deals with this within FinCEN. And I believe that we have to have a 2025 approach to, as you and I talked about, digital currencies in all branches of government. So yes.
Senator Lujan (02:07:57):
Now, Mr. Bessent, in your role as Treasury Secretary, do you agree that you will play an important role in advising President Trump and Congressional Republicans on policy related to the economy, including investment in government programs?
Scott Bessent (02:08:14):
Yes, Senator.
Senator Lujan (02:08:16):
Now, I was pleased in our meeting that you stated, "No cuts will be needed," to achieve your economic goals. I think that might surprise a lot of my Republican colleagues, but I very much appreciate that conversation that we had. Now, yes or no, will you recommend cutting Medicaid?
Scott Bessent (02:08:38):
I'm sorry. I didn't hear whether you said Medicaid or Medicare.
Senator Lujan (02:08:42):
Yes or no, will you recommend cutting Medicaid?
Scott Bessent (02:08:46):
Medicaid? It's the business of Congress to do the budget, and I am in favor of empowering states, and I believe that for some states that will be an increase, for some states that will be a decrease.
Senator Lujan (02:09:10):
So Mr. Bessent will you recommend cutting Medicaid to President Trump? And I'll remind you that you acknowledge that one of your responsibilities as Secretary of the Treasury will be to be providing this advice.
Scott Bessent (02:09:25):
I will get back to you on this when I have seen the details of the full budget proposal once President Trump is in office, and if confirmed.
Senator Lujan (02:09:39):
Will you recommend cuts to broadband following the investments that we've been seeing across the country, making immense progress in connecting more people across the country that were included in the bipartisan infrastructure law?
Scott Bessent (02:09:52):
Senator, I am unfamiliar with the exact program. It is my understanding that much of the allocated funding has not been dispersed yet. So I will get back to you on that.
Senator Lujan (02:10:08):
Well, Mr. Bessent, a lot of folks back in South Carolina, including some of your farming neighbors are getting connectivity because of these programs. You may just need to chat with them about the importance of what this program means. As my time expires, it might surprise many here that there's only a couple of us in this body that are members of Head Start. And I imagine we might hear a little bit more of that from my brother in Head Start, Mr. Warnock here. But when we talk about the importance to early education in America, the economic benefit, yes or no, will you recommend cuts to Head Start?
Scott Bessent (02:10:45):
Again, Senator, I'll have to get back to you on this. I don't understand the intricacies of that program.
Senator Lujan (02:10:55):
Of Head Start?
Scott Bessent (02:10:57):
Yes, I don't understand the budget ramifications. I don't understand-
Senator Lujan (02:11:01):
Do you know what Head Start is?
Scott Bessent (02:11:02):
Yep, I believe it is an earlier childhood education program.
Senator Lujan (02:11:08):
That's fair, sir. I didn't realize that you have to qualify to get into that program. So the family that I was raised in, we qualified to get into that program, but it opens up doors. Heck, it got a couple of us to the United States Senate. So we certainly hope that we might be able to find some agreement in protecting that program, and if someone tries to eliminate that in early childhood education, that we could count on you on behalf of New Mexicans, South Carolinians, and people across America to say, "No, we're not going to do that one." Mr. Chairman, thank you for the time. Appreciate you being here again, sir.
Mike Crapo (02:11:40):
Thank you. Senator Barrasso.
Senator Barrasso (02:11:42):
Thanks so much, Mr. Chairman. Thanks so much for your willingness to serve. Thanks for being here. I enjoyed our discussion quite a bit in talking about the future for the country and the role of the Treasury Secretary in getting our economy back on track. This means lower prices, higher wages, more jobs,
Senator Barrasso (02:12:00):
… some stronger economic growth for America. It also means protecting people in states like Wyoming, from crushing regulations and devastating tax hikes. It means getting wasteful, spending under control, and I'm greatly encouraged by our meeting that we had. You have, I believe, a strong vision for America, a strong vision for unleashing American energy, for getting tougher on China, for getting tougher on our adversaries and getting the federal government out of the way for so many of us. I'd like to talk a bit about energy and I've just been in the other committee yesterday, Secretary of Energy earlier today, the Secretary of Interior. Lots of energy questions, so I'm glad that we agree. A key ingredient in reigniting the economy in this country is to unleash American energy in my home state of Wyoming. We're an energy superpower as a nation and we are America's energy breadbasket in Wyoming.
(02:12:51)
Energy production is the heart of our Wyoming economy and the nation's economy. It supports workers as well as schools infrastructure. The money that comes from that, the tax revenue. Wyoming is the least populated state, but it is the third-largest net energy supplier producing 12 times more energy than we consume. It's the forefront of oil, natural gas, coal production, carbon capture technology, hydrogen production, many alternative sources of energy. What's happened is that energy producers in Wyoming and across the country faced a whole of government assault from the Biden administration on American energy production, taxes, crippling regulations. They've weaponized the tax code in ways that are just unthinkable to me against conventional American energy production. The things that Joe Biden signed into law just made things worse. But the good news is with you there, with President Trump and the White House, things are about to change. So you've talked extensively about boosting American energy production. What role do you see yourself playing as Treasury Secretary in making sure we become American energy dominant and in terms of energy security as well?
Scott Bessent (02:14:07):
Senator Barrasso, I very much enjoyed our meeting and wide-ranging discussion and my family and I had a fantastic vacation in Wyoming this summer. In terms of within the potential Trump administration, I'm sure you've heard it from Secretary- designate Wright and Burgum, we refer to as energy dominance and energy dominance. One of the reasons that I believe we have not been able to apply as muscular sanctions against the Russian Federation or unwilling was because the supply of energy was constrained in the U.S.
(02:14:56)
The same with the terrorist regime in Iran. So I would view that as we can raise U.S. production, we would squeeze down the bad actors, especially Iran. I think I'm right, maybe not in the exact numbers, but in order of magnitude, I believe Iran was down to a hundred thousand barrels of oil exports when President Trump left office. I believe that they are now exporting in excess or approximately 1.7 million. So through sanctions policy, I believe that we can, again, as I like to say, make Iran poor again, not the Iranian people, the Iranian, the government and then at the same time have our domestic producers push that up with the highest energy standards in the world.
Senator Barrasso (02:15:56):
We do it. We're the best stewards of the land and I agree. And what we've also seen, as you mentioned with the Iran increasing the sales or selling it to China, China is buying it at discount. So they're getting cheap energy. Iran is getting tanker loads of cash back essentially, so they're using that money for terrorism, in terms of our own national security. I have one last question in my time remaining, and this has to do with the Tax Cuts and Jobs Act that we passed in 2017. If that were to expire, we're talking about a massive tax hike of over $4 trillion. What would that kind of tax hike mean for small businesses, for job creators as well as our global competitiveness as if all of a sudden, we put the heavy wet blanket of a $4 trillion tax increase on our nation?
Scott Bessent (02:16:40):
Senator, I think it would be devastating especially for small businesses. One of the things that, as someone who came from a very small town, lived in New York with a very big town and came back to a small town, I believe Wall Street has done great the past few years and that Main Street has suffered. I think it's Main Street's time. Wall Street can continue to do well, maybe not as well and it's time to have a main street. Small business led recovery led by small banks, regional banks, as I call it, reprivatizing the economy. And as I said earlier, since November 15th, since President Trump's election, we have seen the biggest jump in the history of the Small Business Confidence Index.
Senator Barrasso (02:17:34):
Thank you, Mr. Chairman.
Mr. Crapo (02:17:35):
Thank you. Senator Tillis.
Mr. Tillis (02:17:37):
Thank you Mr. Chair. Mr. Bessent, thank you for being here and time in the office and congratulations to you, your spouse, John, and your children, I think Cole and Caroline. He's doing a great job. I leaned over to Senator Johnson and when you were being attacked by one of my colleagues on the other side of the aisle, it says the guy like he's got a heart rate of 40. You're very composed and thank you for staying on the facts and demonstrating all the knowledge you possess. When I wasn't here, someone put in a question your viability as a nominee because of a lack of public service, which I find interesting sometimes I think we have too much public service and people's background here and not real world business experience. But can you give me an idea of why this nomination may represent your first entry into public service?
Scott Bessent (02:18:27):
Yes, Senator Tillis and again, as an adjacent state and someone who's a homeowner in North Carolina, I appreciated our conversation in your office. Look, I have been in public service, just not in the government. When I lived in New York, I was a strong supporter of a charter school called Harlem Children's Zone, which takes the young residents in a multi-block, gigantic block, keeps getting bigger, area of Harlem and takes them from cradle through high school. But I have found that my service, anyone can write a check or anyone with my means can write a check. What has been fulfilling for me is mentoring many of these young people. I'm still in touch with them today. I was also a trustee for Rockefeller University, one of the great research universities in the world. I was on the executive committee and chaired the investment committee. But sitting here today is especially meaningful for me because this is my third try at public service.
(02:19:40)
In 1979, when I was 17 years old, I wanted to fight for my country. My father had just experienced extreme financial difficulties. I wanted to attend the U.S. Naval Academy. I was offered by our congressman in the sixth district of South Carolina an appointment but was unable to take that appointment because of my sexual preference. I managed to go to Yale, worked several jobs to do that. While at Yale I wanted to do public service and join the foreign service. I was told also not welcome. So sitting here today is my third attempt at public service and I sit here knowing that President Trump chose me because he believes I'm the best candidate, not because of my sexual preference, not because treasury secretaries with green eyes do better. And I think it is a tribute to President Trump that he looks at people as people.
Mr. Tillis (02:20:43):
I agree and I appreciate that answer. I'm going to go into a lightning round here. First off, this is the Joint Committee on Taxation distributional analysis of what happens to the various socioeconomic strata if we don't manage to pass the jobs and tax cut extension. Without objection?
Mr. Crapo (02:21:04):
Without objection.
Mr. Tillis (02:21:07):
Senator Johnson does big phone boards. I do hand outs. I'm handing this to all of my Republican colleagues right now saying if we fail to extend the Jobs and Tax Cuts Act, we are going to own a fiscal crisis for people in Middle America. 93 million people will be affected in terms of an added tax burden if we fail to pass an extension of TCJA. Now the last time I checked, there are not 93 million rich people in this country. There are people who struggled like you did when you were a kid and like I did when I was a kid who had to work themselves through college and every time we had some well-intentioned program from government to make things better for me, it made it harder for me to dig myself out of the economic situation I was born into. So the facts are sovereign things. This tells us what happens if we fail to pass the Jobs and Tax Cuts. And it doesn't even get to the impact that I had.
(02:22:10)
Turns out at that very table, Jelly Roll was here for a finance committee hearing. He lived in the same trailer park that I did 20 years later in South Nashville, Tennessee. And what I found interesting in my own family as we were right on the economic edge, every time government had some well-intentioned program to tax the rich, I went from a house to a trailer park and every time government let us do what we wanted to do, we lived in a house. I'm living example and I'm sure Ben Ray Luján and some other people have had those experience. You got to go back and look historically at when people like me and people like you had real opportunities. I look forward to supporting your nomination and Mr. Chair, I'm going to send some questions for the record, but it's just to reinforce the message that Republicans have to deliver and anyone who says that we should not is advocating for a $5 trillion tax increase that will hurt the people who are on the economic edge worse than anybody else. Thank you, Mr. Chairman.
Mr. Crapo (02:23:18):
Thank you. Senator Warnock.
Mr. Warnock (02:23:19):
Thank you Chairman Crapo. I'm grateful and honored to be joining this committee. I look forward to working with you and ranking member Wyden to ensure our tax code supports working families to protect social security, Medicare, Medicaid, and to promote trade policies that work for Georgia businesses and that boost our economy. Mr. Bessent, good morning and good to see you again. I enjoyed our conversation earlier this week and in that conversation you outlined ambitious goals for the federal government and deficit reduction. I'd like to follow up on our discussion about your economic plan. According to a new report from the Tax Policy Center, the largest tax cuts from extending the Trump tax bill, we go to those with the highest income, especially those in the top 1% making more than $1 million per year. In fact, the top 1% of owners will take home roughly one quarter of the benefits of the law and the top 5% will get almost half of that. Do you believe that the wealthiest 1% of Americans deserve or need an additional tax cut?
Scott Bessent (02:24:40):
Senator Warnock, I greatly enjoyed visiting with you. I think probably a better way to look at it is on a percentage basis and when I think about the distributional aspects of the Tax Cuts and Job Acts that most of the benefits accrued for the working and middle people as opposed to the upper ends. In absolute dollars as you just read. That is correct, but I think it's important to look at it in percentage terms.
Mr. Warnock (02:25:14):
So you believe that the tax cut that provided one quarter of the benefits of the law to the top 1% and top 5% getting almost one half actually benefited those at the bottom more than it did those at the top? Is that your testimony?
Scott Bessent (02:25:31):
I believe that in 2018, 2019 that the households and the bottom 50% of income earners, the wealth increase for those households was three times higher, three times higher than the wealth increase for the top 10% of Americans.
Mr. Warnock (02:25:53):
So we should continue to move in that direction and give more tax cuts to those at the highest. You have talked about high deficits as a national defense problem and I agree with that. I think we need to be fiscally responsible. We need to work to close the deficit and bring the national debt under control. In 2013, Congress extended the Bush tax cuts for everyone except those making more than $400,000 a year. This bipartisan decision saved the treasury $600 billion helping to narrow the deficit. Do you agree that ending the tax cuts for those making more than 400,000 would help close the deficit and reduce our national debt?
Scott Bessent (02:26:34):
Senator Warnock, I do not. I believe that you would capture an inordinate amount of small business people who largely are in that cohort of 400,000 to a million.
Mr. Warnock (02:26:49):
So you wouldn't cut it off at 400,000. What about $1 million?
Scott Bessent (02:26:53):
Again, I believe these are small business pass-through owners and I believe that, as I said before, Wall Street's done great. It is time for Main Street to do well and small businesses need to drive what I call the reprivatization here away from this government spending.
Mr. Warnock (02:27:15):
I agree that it is Main Street's time. I'm from Atlanta, so I'll say Peachtree and some other locations in my state. What about those making more than 10 million? Would we reduce the deficit by extending those tax cuts for folks making about $10 million?
Scott Bessent (02:27:37):
Again, I think it's important that we put in incentives for them to invest. So going back to the 100% depreciation for equipment that I think that -
Mr. Warnock (02:27:51):
And I don't mean to keep interrupting, but I'm the pastor and we're known to be loquacious of speech, but I'm running out of time here. What about $1 billion
Scott Bessent (02:28:02):
Sir, again, I think that these are the job creators.
Mr. Warnock (02:28:09):
So there's no income level for which you would support raising taxes. Is that fair?
Scott Bessent (02:28:15):
There is no income level that I don't think we should continue the TCJA as it was.
Mr. Warnock (02:28:25):
All right. I think our country is facing structural deficits. However, I think that to continue to reduce taxes for the wealthy and letting them avoid taxes based on what they already owe is not going to get us out of that problem. But I look forward to continuing that discussion with you. Thank you very much.
Scott Bessent (02:28:46):
Thank you Senator.
Mr. Crapo (02:28:47):
Thank you very much. And before we go on to Senator Blackburn, I just want to restate it. There's a lot of facts that have been thrown around in this hearing today. I'll just restate one that I said in my opening statement and that is of this 4.3 to $4. 6 trillion tax increase that it could happen, a hundred thousand dollars.
(02:29:04)
(Silence).
(02:29:16)
That is simple tax increase. Senator Blackburn.
Mrs. Blackburn (02:29:22):
Thank you Mr. Chairman, thank you for bringing that clarification because if we do not extend the Tax Cut and Jobs Act, it is that $4 trillion tax hike that people are going to see. And I appreciate your comments about a main street small business recovery. That is something that is so vitally important. And as the chairman knows, we have had much over the last few years with the Biden administration over how they determine that $400,000 number, if it is the gross, if it's the adjusted gross. They came up with the term of total positive income, which is everything you make. And we know that the Biden administration approach on this would be a killer for Main Street businesses. We know that 199A is vital to them and they need to see that in the Trump tax cuts and in that permanent so that we can have that main street small business recovery and revival.
(02:30:35)
I appreciate that and I appreciate that President Trump has nominated you for Treasury Secretary because you are sensitive to that and what your work means to Main Street and to individuals and getting the IRS under control and looking at some of these provisions that are going to be in front of you. So we appreciate that you would come back a third time and look at public service and that John and Caroline and Colin, by the way, they are behaving so beautifully. Whatever they want, they get.
Speaker 3 (02:31:22):
Ice cream.
Mrs. Blackburn (02:31:23):
Senate orders. We'll be right there to support them. I do want to talk with you for a moment about CBDCs and some of the push that the Biden administration had. They did an executive order for Treasury to research development of a CBDC in the United States. And of course this causes a lot of us heartburn because we look at what the CCP did with the digital Yuan in connection with the Olympics. So upon confirmation, how would you approach this discussion of CBDCs and are you for them or against them? Could you end the Biden administration project to create a US-based CBDC?
Scott Bessent (02:32:19):
Senator Blackburn, thank you for your remarks. I may have a little trouble disciplining the two behind me as I'm sure that I will hear that a US senator has vowed for their behavior, but on CBDCs, I see no reason for the U.S. to have a central bank digital currency. In my mind, a central bank digital currency is for countries who have no other investment alternatives. So if we think about a reserve manager, a high surplus country, whether it's Saudi Arabia, the Singapore, who ends up with call it the Chinese country like the Yuan and the RMB, if you own that currency, you have to have something to invest in. There's very little to invest in If you want to hold the currency. You could own Chinese government bonds which don't yield very much.
Mrs. Blackburn (02:33:22):
So your view of that would be a negative view?
Scott Bessent (02:33:26):
Well, I view that many of these countries are doing it out of necessity, whereas the U.S., if you hold U.S. dollars, you could hold a variety of very secure U.S. assets.
Mrs. Blackburn (02:33:36):
I appreciate that. I appreciate your comments earlier to Senator Barrasso about the pillar two negotiations. This is something that we would be well-served to extract ourselves from this. Currently, the preliminary data that we have 40%, right at 40% of the total pillar two tax burden is on us. And China, of course has found a way to exempt themselves from this that is in need of a… And I look forward to you doing that and standing with our companies. I want to get, and this I think you can just submit to me in writing, advanced persistent threat, APT, which is China. They were able to override Treasury's security system and remotely access workstations where they reported access to unclassified documents. And of course this is Chinese Communist Party at work again. We found this out after finding out from the Treasury Inspector General that 2,800 IRS employees still had TikTok on their government devices. If confirmed and when confirmed will you take steps to improve Treasury's security systems?
Scott Bessent (02:35:09):
Senator Blackburn, actually one of the earlier questions was what policies of the current Treasury secretary do you disagree with? And as you noted, the December 8th hack into Treasury was via a work from home system. So I, as Treasury Secretary if confirmed plan to be in the office every day that I'm in Washington. And I expect all the other employees to do that too.
Mrs. Blackburn (02:35:39):
Thank you.
Scott Bessent (02:35:40):
And I think it's a matter of national security for everyone to be at 1500 Pennsylvania Avenue.
Mrs. Blackburn (02:35:48):
Thank you.
Scott Bessent (02:35:48):
Thank you.
Mrs. Blackburn (02:35:48):
That is well received. Thank you Mr. Chairman.
Mr. Crapo (02:35:49):
Senator Welch.
Mr. Welch (02:35:51):
Thank you very much. Mr. Chairman, it's delightful to be a new member of the committee. I look forward to working with you and all our colleagues. Mr. Bessent, thank you so much for your visit yesterday and welcome to your family. As we discussed the situation for a lot of Vermonters who work incredibly hard is very tough. Vermont actually has one of the widest, if not the widest gap between what people can earn and what their expenses are. So it's tough at the end of the month to pay all the bills, the grocery bills, the healthcare bills, all of these things and working abstractly about this tax plan. And the reality for most folks in this country is that for the past 40 years, working Americans have actually had a pay cut, not a pay increase. And my hope is that whatever tax policy we have is going to start with a commitment to making lives better for the Main Street folks that you mentioned, and I'm glad that you did, but there is going to be a lot of negotiation on how to pay for these tax cuts.
(02:37:07)
And one of the things that'll be on the block is something that's very, very important of Vermonters and that's the affordable tax care credits that we have now. So in Vermont, healthcare is incredibly expensive for everybody. But if we have, just as an example, an electrician in Bennington, Vermont, who's making $67, 000 a year with the tax credits that are set to expire, that family would have a $700 a month increase in their healthcare bill that's going to hammer them. It's like $9,000. So my question to you is, in putting together this tax proposal where you are going to have to be making recommendations about how to pay for it, will we continue to provide this help to Vermonters like this electrician in Brattleboro so that he doesn't get hammered on healthcare premiums going well beyond what he can afford.
Scott Bessent (02:38:10):
Senator, as we discussed in your office, and I haven't had time to do my homework on this. I think I told you that my family, friends, business colleagues often get sick of hearing my phrase, no data, no opinion. So I will get up to speed.
Mr. Welch (02:38:32):
No, and I appreciate that.
Scott Bessent (02:38:32):
If confirmed, I'll get up to this.
Mr. Welch (02:38:33):
And I appreciate that. I appreciate that. But there's a couple of things that really make a difference for working Americans in South Carolina and in Vermont, the child's tax credit when we had that, it reduced poverty for children by 50%, that's really elemental for hardworking families and the premium support where healthcare is just a brutal expense for employers too, by the way. So my hope is that in the design, we're going to start by making certain that we do no harm to working Vermonters and working South Carolinians, okay. Second on the tariffs. I'm in support of the China tariffs that is defending us against unfair trade practices by China. I'm concerned about the impact of tariffs on Canada and what that does to us in Vermont, our major business partner, export partner is Canada. And from what we have seen, it would raise cost to businesses, probably cost jobs and cost to consumers. So what reassurance can we get from the Trump administration that there's going to be a do-no-harm policy to American consumers and Vermont workers and small businesses with a tariff policy?
Scott Bessent (02:39:51):
Senator, very difficult for me to isolate Vermont especially. But in terms of working Americans, I believe that President Trump understands that it's working America. He had a very unique coalition.
Mr. Welch (02:40:10):
Well, he does. In my hope the policy will reflect that, so I appreciate the opportunity to work with you on that.
Scott Bessent (02:40:18):
Yeah, I look forward to working with you. And I think he understands that it's the affordability crisis.
Mr. Welch (02:40:25):
Right. It is. And just the last thing, very little time, we were talking about credit card rates for consumers. Credit card fees for our small businesses are the highest in the whole world. The highest in the whole world. Why can't we bring them down and pay what Europe pays? Our small businesses, it's like the second or third-highest expense for them and you'll have some impact there. But those costs on our small business, including the pass-through businesses, I'd like to get them down and get your help in doing that.
Scott Bessent (02:41:00):
I look forward to working with you on this issue if confirmed.
Mr. Welch (02:41:04):
Okay. Thank you very much.
Scott Bessent (02:41:06):
Thank you.
Mr. Crapo (02:41:07):
Thank you. Senator Marshall.
Mr. Marshall (02:41:09):
Well thank you Chairman Crapo, Ranking Member Wyden. It's great to join the finance committee. As I listen around, it seems to me like so many of us share the same goal that we want Americans to be prosperous. We want them to be able to live their American dream. We disagree how to get there oftentimes, but we all had this same goal that we want Americans to be prosperous. Mr. Bessent, welcome and congratulations on your nomination as well. I think it could be said that rural America in many ways is President Trump's base. Of the 77 million people that voted for President Trump, a lot of them came from rural America.
(02:41:47)
In fact, I think I could argue that 90% of rural Americans voted for President Trump. And no one has suffered more of these last four years than rural America has. So my questions may be geared up about that is this economy, what can we do to help Main Street to help small businesses and to help rule America. Now, everyone knows that your financial wizard, that you've been successful on Wall Street, but I just want to understand your commitment to small-town America. You're from a small town. I think you understand agriculture from our conversations and even some background in community banks. How important are community banks to those small towns? And what is your commitment to rural America?
Scott Bessent (02:42:32):
Well, Senator Marshall, I think again, maybe one of the few Treasury secretary nominees in recent period who occasionally listens to farm radio on XM on weekends. And I can tell you that after the Silicon Valley, the debacle, that farm radio was intensely focused on the potential loss of small and community banks. And they are important pillars for those communities. So I think examining in terms of what is the regulation, what is the supervision, are they being unduly burdened and that they are not able to help their communities? What is the supervisory edict there? And then again, as I said earlier too, I think that China has not made good on their ag purchases for four years. And if confirmed next week, I would start pushing for them to resume the purchases, and then I would conference with President Trump on whether he believes that there should be a makeup provision.
Mr. Marshall (02:43:58):
Thank you. I want to stay on rural America and talk about tax credits for a second. 45Z is a tax credit, and I'm not sure if you're familiar with it or not, but it would really help rule America in the standpoint that we help take some of our feed stocks, whether it's soybeans or corn, and turn it into biodiesel, renewable diesel. I think it's going to lead to a cleaner air for all of us, but it's certainly very important to rule America and just would ask that you would look into it. But what we can't do is let China benefit from it. I really think any tax credit we have should not impact foreign entities. And just wanted to get a few background thoughts on this 45Z tax credit from you.
Scott Bessent (02:44:39):
Well, as we discussed in your office, and you gave me a very good overview of how the Chinese backdoor into this program, so that's obviously unacceptable and I look forward to working with you on the 45Z.
Mr. Marshall (02:44:56):
Great. And then I want to finish up probably here on the Trump tax
Mr. Marshall (02:45:00):
… cuts, and how important it is to make them permanent. I don't understand what $4.6 trillion is, but I can tell you that families back in Kansas were able to keep about $1,000 a month in their pocket after the Trump tax cuts took effect. And I think that would be going forward, so if we lost it, if we lost these Trump tax cuts, then I would assume that those same families would be giving the federal government another $1,000. So this issue, to me, is vitally important to rural America to the tune of $1,000 a month. So I guess my question for you is, beyond just making the current Trump tax cuts permanent, what else would be on the menu that would help the economy as far as other tax cuts?
Scott Bessent (02:45:45):
Well, I think President Trump has talked about, and it's not specifically a rural issue, but it is something that affects, say, the lower two quintiles of the income distribution more, no tax on tips, no tax on Social Security, no tax on overtime, and perhaps making auto loans tax deductible again. You know, that would go a long way towards addressing this affordability crisis.
Mr. Marshall (02:46:15):
So that's a great start. I hope we can come back and talk about C corp tax coming down as well one more time. That is permanent as it is, but I think there's opportunity there. Thank you, Chairman. It's an honor to be here.
Ron Wyden (02:46:26):
Mr. Chairman, one sentence. I very much appreciate our colleague mentioning 45Z, the ocean, excuse me, the clean fuels production tax credit. That is part of the Clean Energy Tax Credits that we got into law, so I look forward to working with you on it.
Mike Crapo (02:46:42):
Thank you. So let me just, Mr. Bessent, so you understand how we're going here. I know it's been a long time, and thank you for your patience. We have Senator Warren next, followed by Senator Scott, and then Senator Whitehouse, and then Senator Wyden would like to ask one more question. He gets the only extra question of the day, and then he and I will probably make a few very brief remarks in wrap-up, and we'll be finished at that point. Senator Warren.
Speaker 4 (02:47:14):
Thank you, Mr. Chairman, and welcome, Mr. Bessent, and welcome to your family. It's good to see everyone here today. So last month, President Trump said he supports repealing the debt limit. So do I, so there we are. Donald Trump and Elizabeth Warren are singing from the same hymnal. Mr. Bessent, let's make it a trio. Do you agree with President-Elect Trump that the debt limit should be repealed?
Scott Bessent (02:47:43):
Senator Warren, first of all, I enjoyed our visit in your office and appreciate the fact that when I walked in, you said, "Let's talk about what we have in common, our love of Cape Cod, the Red Sox, and addressing the affordability crisis and the housing shortage." So the debt limit is a very nuanced convention. What I would like to do is get back to you and President Trump. I'd like to do a survey of market participants. With this amount of debt, it's a very fragile equilibrium that we sell bonds in.
Speaker 4 (02:48:29):
Mr. Bessent, forgive me for just a minute here, because this is the question about the… I'm not asking you whether or not we ought to increase our debt. I'm asking a very different question, and that is whether or not we should have a statute in place that says there's a debt limit, that if we don't increase the debt limit, would cause us to default. And that's not an economic analysis. In fact, let me ask you. I understand earlier, you're citing the Congressional Budget Office. Have you seen the Congressional Budget Office projections of what would happen if the United States government defaulted on its debt, that is if we hit the debt limit and just kept on going without raising it or eliminating it?
Scott Bessent (02:49:17):
Look, Senator Warren, the United States is not going to default on its debt if I'm confirmed.
Speaker 4 (02:49:22):
I-
Scott Bessent (02:49:25):
But you know, I will tell you that for people who don't understand the debt limit, it might be like taking out your handbrake in your car, that you can still hit the brakes, but it's one less feature, and-
Speaker 4 (02:49:41):
But I thought you just said you'd never use it, so you're talking-
Scott Bessent (02:49:44):
I'm sorry?
Speaker 4 (02:49:44):
… about a handbrake that appears to be there, but in fact is not connected to a braking system.
Scott Bessent (02:49:49):
I'm sorry?
Speaker 4 (02:49:49):
It is literally never used, right?
Scott Bessent (02:49:52):
Never been-
Speaker 4 (02:49:53):
And the reason-
Scott Bessent (02:49:53):
I've never pulled the handbrake going 60 miles an hour in my car.
Speaker 4 (02:49:56):
And the reason for that-
Scott Bessent (02:49:56):
I hope never to.
Speaker 4 (02:49:57):
… I assume is the enormous cost of a debt default. In fact, the Congressional Budget Office that I was asking about a minute ago said that… Or Moody's estimated that a debt limit breach would cost the US economy $12 trillion and cost six million people their jobs. I think this is the reason that President-Elect Trump said that eliminating the debt limit is, quote, "the smartest thing Congress could do," and I'd like for Congress to do the smartest thing, and that is eliminate the debt limit so we don't have this problem.
Scott Bessent (02:50:36):
Well Senator Warren, I will tell you that once President Trump takes office, and if I'm confirmed, if he wants to eliminate the debt limit, I will work with him and you on that.
Speaker 4 (02:50:46):
Great. Great. Because I agree with President-Elect Trump that the debt limit should be repealed. I note however, right now, that's not what Congressional Republicans plan to do. Last month, they committed to raising the debt limit by another $1.5 trillion. So why do Republicans want to raise the debt ceiling? Because their plan is to shovel new tax cuts to billionaires, and that would increase the debt by more than a trillion dollars just in the next four-year period. During his first term, President Trump's only major legislative achievement was his 2017 tax cuts, that mostly got sucked up by millionaires, billionaires, and giant corporations.
(02:51:32)
Now, most of these cuts were good for only eight years so that Republicans, who were designing them, could claim that the cost was only $2 trillion, eight years of cuts that added $2 trillion to the debt. Now, we're talking about Republicans and President-Elect Trump who want to give those same rich people and giant corporations more years of tax cuts. And I just want to be clear that we understand each other here, that I think it was Reverend, or Senator Warnock who asked you about is there any billionaire rich enough who you wouldn't support a tax cut for going forward.
Scott Bessent (02:52:21):
I think it's unwise to single out any-
Speaker 4 (02:52:26):
Rich people?
Scott Bessent (02:52:28):
… any individual.
Speaker 4 (02:52:29):
Okay. Is there any group of billionaires? You can just pick a dollar figure, and there can be more than one above that.
Scott Bessent (02:52:37):
I could give you a glib answer, but I won't, but you know, again, that's not where the money is. At one point, when President Obama was debating Mitt Romney, the moderator said, "But sir, that would make collections go down," and he said, "Yeah, but it's about fairness." And I have to tell you-
Speaker 4 (02:53:01):
Yeah.
Scott Bessent (02:53:01):
… Senator Warren, I'm about collection.
Speaker 4 (02:53:04):
I understand, but I like to think that fairness is about billionaires actually paying their fair share too. Thank you, Mr. Chairman.
Mike Crapo (02:53:12):
Thank you. Senator Scott.
Speaker 5 (02:53:13):
Thank you, Mr. Chairman. Scott, welcome, or Mr. Bessent, welcome to our community, and good to see you again, and thank you for your willingness to serve. It is certainly a sacrifice to you and your family, but I think it's actually an investment for the country. We need folks who are willing to sacrifice on behalf of a greater cause. The greater cause in this instance is generations of Americans you will likely never meet but will be better off because we do the right thing. One of the things I think about as the right thing… I know you grew up in a working class family and I grew up in a single parent household mired in poverty, it is having stability in our financial system.
(02:53:45)
One of the places where we need the greatest amount of stability is for our banks. So think about Silicon Valley Bank and other banks that failed. I recently, as you can imagine, as the chairman of the banking committee, I care deeply about the stability and strength of our banking system. From your vantage point, can you provide your assessment of the current safety and soundness of the US banking industry and what steps you believe are necessary to ensure long-term stability?
Scott Bessent (02:54:13):
Senator Scott, good to see you. Good to have two South Carolinians in the room, and look, I think the strength of the US economy, our financial markets, is the depth and breadth of our financial systems. I believe that we have likely seen the top five banks become too big a share of banking assets. We have seen, because of undue regulation, the shadow banking system get larger and larger, and to the detriment of community banks, small banks, and the small regional banks. So I think that we have to take a look at both regulatory and supervisory conditions in those. I think that the banking system is well capitalized, perhaps overcapitalized, and this comes from someone, my background is as a financial institutions analyst.
(02:55:15)
I have also taught the history of financial crises, so I am very attuned to the idea that financial stability is important. The pendulum tends to swing from one way, go into overshoot, and that from '99 to 2008, that was an overshoot, and since then, the regulation that our banking system has been constrained, and if we are going to have the kind of the generalized Main Street prosperity that I would like to see over the next few years, it's going to be driven by community, small banks, and small regionals.
Speaker 5 (02:55:56):
Well, if I had more time, maybe another five or six minutes, that'd be great. I don't think I'm getting it. Thank you very much. We'd spend a little more time on Basel III, because your answer actually reinforces the fact that Basel III puts more capital on the sidelines, which means there's less capital to loan for mortgages or for starting small businesses, but I won't go there. Where I will go, however, is towards opportunity zones. As you know, I wrote the legislation, and opportunity zones was in fact a bipartisan piece of legislation, although it was only supported by Republicans. And the results of the opportunity zones has been astounding. My friends who are mayors, Democrat mayors, support it and celebrate it, and my friends who are Republican governors support and celebrate it, because the fact is simple, that $84 billion committed and invested in opportunity zones have led to real help coming into some distressed communities. It's only had less than a 5% gentrification rate, which is really important.
(02:56:54)
But for the housing question, so many folks, mayors around the country, said for the first time, because of opportunity zones, they're seeing affordable housing in their downtown areas, and they haven't seen it, John Gettys in Rock Hill, three decades. So we know that they've been effective without gentrification. I hope that the administration will spend some time encouraging and supporting the next generation of opportunity zones. Your thoughts, quickly?
Scott Bessent (02:57:24):
Senator Scott, I think they have been a resounding success, and I recently read data that in terms of affordable housing, the opportunity zones have created more affordable housing within the zones than any other federal government program since opportunity zones were created. So I think that it's a fantastic way to address the housing crisis. I think the inner city redevelopment, I think we could think about opportunity zones more in rural areas.
Speaker 5 (02:57:58):
Yes.
Scott Bessent (02:57:58):
So I look forward to expanding and continuing the discussion.
Speaker 5 (02:58:04):
Thank you. My last thoughts will be a comment, not a question, but as a result of the TCJA, we saw the richest Americans' tax burden as a percent of revenues coming in go up, and we saw the poorest Americans as a percent of revenue coming into the government go down. I think the easiest way to say that is to recognize that a single mother like the one who raised me, in 2017, made, on average, $40,000 a year, her tax burden, her tax percent, went down, her tax rate went down by 71%. That is a result of good policy being good politics, and I hope to keep our eye on the ball of helping the average American have more of their money in their pockets. Thank you.
Mike Crapo (02:58:56):
Thank you, Senator Scott. Senator Whitehouse.
Speaker 6 (02:58:59):
Thanks very much, Chairman. Welcome, Mr. Bessent. Thank you for the meeting that we had in my office. I understand that colleagues have already raised the urgency of more sanctions on Russia's shadow fleet, particularly as it is sabotaging our allies' infrastructure in the Baltic, and urge that it is unfair for Chinese manufacturers to be able to under-price US manufacturers by virtue of lower environmental standards, so I just want to give two big thumbs-ups to both of those notions.
(02:59:31)
As we talked about in my office, I think that the most immediate danger of a major economic collapse is going to come through the insurance industry. We're seeing signs of it in Florida already. The fires in LA are making it worse out in California, but it's occurring nationwide, and as we discussed, where you can't get insurance, you can't get mortgages. Where you can't get mortgages, you can't sell properties at value, and that cascades, according to the chief economist of Freddie Mac, into a 2008-style massive economic recession. So, I would like to ask first that you get somebody on your team to take a look at this report, which I'd ask to put into the record, from the Senate Budget Committee-
Ron Wyden (03:00:24):
Without objection-
Speaker 6 (03:00:24):
… while I was chairing it-
Ron Wyden (03:00:25):
… so ordered.
Speaker 6 (03:00:26):
… on the non-renewals, price increases, and unavailability problem county by county, across the country. And if somebody on your team looks at it and can give you a summary, I would be grateful. And I would actually ask you personally to read this Economist Magazine article. I don't think it's complicated.
Scott Bessent (03:00:47):
No, Senator Whitehouse, you gave it to me in your office, and I did read it.
Speaker 6 (03:00:50):
Good.
Scott Bessent (03:00:51):
So thank you [inaudible 03:00:52].
Speaker 6 (03:00:51):
All right, so we're ahead of you.
Scott Bessent (03:00:52):
I'm good.
Speaker 6 (03:00:53):
I just want to make sure.
Scott Bessent (03:00:54):
I will point out to my children behind me, doing your homework's important.
Speaker 6 (03:00:57):
It is important, and thank you for doing that. I think you're the first person in a nominations hearing who's actually done the reading that has been proposed. I just think that all of us need to be alert to this problem. I think it's actually started. Ernest Hemingway famously said that bankruptcies happen gradually and then suddenly. I think we're in gradually on a climate change driven insurance crisis that will cascade out into the whole economy. I gave my environment public works colleagues a book this thick. I gave your team a similar book of all the many high-level, serious, peer-reviewed studies that have shown these economic risks, and I just don't think we're ready for it. And I think it's really important that we be ready for it, and I don't want anybody to say that they weren't warned about it, so there's my warning.
(03:01:57)
Last question to you, and I'm going to be treading into an area where I don't know a thing, because I just heard about this this morning, and I've been the ranking member in the EPW noms hearing. So what I did read this morning is that the manner in which you have structured your partnership has enabled you to avoid the payment of nearly a million dollars in Medicare taxes, and that the IRS has taken the position that the manner in which you structured your partnership to avoid those Medicare taxes does not actually support avoiding Medicare taxes.
(03:02:43)
It's probably more complicated of an issue than you and I are going to get through in the next one minute and 13 seconds, so we'll follow up with a question for the record, but I just think that when we're dealing with these massive issues of income inequality, and threats to Medicare, and all of the concerns that I think actually helped propel President Trump to the presidency, it would be extremely awkward if the secretary of The Treasury were taking advantage of a supposed avoidance mechanism that the IRS, which you oversee, has determined actually doesn't produce that result. And somehow, those things need to come into alignment. I don't know why. I supposed the easiest thing would be to go back and pay the Medicare taxes, but again, this is way more complicated than you and I can dispose of in the next half-minute. But I do think it's important. I think it's really important to send a message as an incoming Treasury secretary, that everything you do with respect to your personal taxes, aligns with IRS guidance.
Scott Bessent (03:03:50):
Senator Whitehouse, thank you for the question. It is my, the firm's taxes, and we are up to date on all our taxes. This matter is not by us, but it is in continuing litigation. If confirmed, I have agreed to shutter my firm, and I have also informed the ranking member and the chairman that I will provision the amount that is lower than the amount that was stated in the press release that went out last night, and I will hold that until the case makes its way through the courts. So once that-
Speaker 6 (03:04:35):
Well, that seems like a tensive response to the question, but I'm glad you respect that this actually is a problem that needs to be attended to, so thank you.
Scott Bessent (03:04:46):
Thank you.
Mike Crapo (03:04:46):
Thank you. And Senator Wyden has asked if he could add one final question. You get the last one, Senator Wyden.
Ron Wyden (03:04:52):
Thank you, Mr. Chairman, and I gathered that after this, at some point, you and I will have some closers. I appreciate that, and I'm going to be very short on that as well. Mr. Bessent, I want to ask about the double standard with respect to tax enforcement in America. The working person, a firefighter, or a nurse, or somebody who works for a wage, pays taxes with every single paycheck, and the government gets that information. And to a great extent, the ultra-wealthy can have a very different system. They can bring in this whole battery of accountants, and lawyers, and the like, and say, "You know, make sure that I don't have a lot of income this year," and then they don't have the same reporting system.
(03:05:47)
And what I have always felt is that ensuring that the government, the IRS, can do tax enforcement to prevent wealthy tax cheating is absolutely crucial to limiting this double standard with respect to enforcement, where you have all this information from people who are working for a wage, and you're trying to figure out what's actually going on with lots of wealthy people, because to me, the scam is in what's legal. I want it understood, and I'm talking about people using their accountants, and lawyers, and this battery of people. So my question to you is do you believe that it makes sense for the Congress to give the IRS the resources to collect taxes from people who may be cheating? And we don't even know, because it's so hard to run down all this information. Do you believe it's important for the Congress to fund the IRS for that kind of enforcement?
Scott Bessent (03:06:51):
Senator Wyden, I believe that collections are very important, and I believe that the IRS… And again, I haven't been confirmed. I have had no meetings. This is all external. I believe that a large amount of it can be solved by data processing, and we are on the verge of an AI revolution, and I would hope that the AI revolution, much as it has in medical technology, it's pattern recognition, and my understanding now is that the agency runs on 12 different systems, on COBOL, which is the programming language when I went to Yale in 1980, so I am 100% in favor of that, of updating those systems.
Ron Wyden (03:07:48):
So, you talked to me about this in the office, and I appreciated the comments. It's still resources. It's going to be computers, perhaps, not people, but I showed up in the United States Senate when only one person, Pat Leahy, knew how to use a computer, and so we've seen these dramatic developments. And I think you're right. AI is going to shape the debate, but it still leaves the question. We're going to need resources. And again, what you've seen, because we don't have the resources to go after the wealthy tax cheats, people who used the Earned Income Tax Credit or something, they're the ones who get the audits and the like. And I want to see, in this position, somebody make a commitment to making sure we'll have the resources to go after the wealthy tax cheats, who have this unique kind of system, and I would acknowledge your point that certainly, it's going to be a challenge in the years ahead with respect to AI and other technologies, but we're still going to need resources. Are you going to support that?
Scott Bessent (03:08:57):
If confirmed, I will come back to you with a plan for upping collections.
Ron Wyden (03:09:03):
On wealthy tax cheats?
Scott Bessent (03:09:05):
Well, for… You seem to believe that the wealthy cheat more, but that… I think across the entire income spectrum, so you're saying that the wealthy have this special cache, and if there is some large mother lode there, then to figure out how to crack that, whether it's through AI or some other means, that I will commit to coming back to you.
Ron Wyden (03:09:39):
Well, let me tell you why it's so important. Former IRS Commissioner Rettig, who is President-Elect Trump's last IRS commissioner, testified here that the IRS needed additional multiyear funding because it was, quote, "Outgunned when it came to auditing wealthy individuals and large corporations." So, the view that I have stated today is not just one that I offer, but a former Trump appointee said specifically that the agency was outgunned with respect to resources. So you've indicated that you'll continue the discussion. It's an important one. Thank you, Mr. Chairman.
Mike Crapo (03:10:18):
Good. Well, thank you, and why don't you go ahead with any closing remarks you'd like to make right now, and then I will wrap it up?
Ron Wyden (03:10:23):
Yeah. I'm going to spare everybody, and especially the nominee, a filibuster. It's been a long morning, and Mr. Bessent, we started off with your confirming that you're going to protect taxpayers' ability to file their taxes for free directly with the IRS, and I think that's constructive, because I think when it works for a second straight year, we're going to begin to join the rest of the Western industrialized world in making sure that our people have a system that works for them, that empowers them if they choose it. With respect to some other issues, I'm concerned about a number of other matters, and we may need to have some additional conversations about it.
(03:11:07)
What concerned me was your response to my question about wealth rather than work with respect to being favored in the tax code, and I think today, that's a reality. That's just plain fact, and the people I represent know it, because they pay taxes with all their paychecks, and they're paying a higher rate than people who, as I've indicated today, have good lawyers and good accountants. So I continue to be very troubled by that, and some of the past reforms have tried to minimize those differences between tax rates for wealthy people and tax rates for workers, but I remain concerned about that.
(03:11:53)
And with respect to some of the other issues, I leave you with the proposition that I haven't really heard you touch on, and it's the proposition that Bill Bradley and I have believed in lo these many years, is we want a tax code that gives everybody in America the chance to get ahead, and with differences like the one I've asked about, the difference between the rates for the wealthy and for workers, there's a long way to go to get it done. So I'll look forward to continuing some conversations. Thank you, Mr. Chairman.
Mike Crapo (03:12:29):
Thank you, Senator Wyden, and Mr. Bessent, we're toward the very end here. I'll be brief myself. I want to end where I started out. I think that it's very clear that you have acted in your dealing with the vetting of this committee in a very, very straightforward, courteous, and honorable way. When it comes to your qualifications to be the next secretary of The Treasury, there is no room for debate, and you have shown that today here in the hearing.
(03:13:03)
Your background, your training, every is tailor-made for this role, and your character and demeanor are self-evident. You have satisfied our due diligence process. In prior Congresses, I've joined with many of my Republican colleagues in voting for well-qualified Treasury secretary candidates put forward by a Democratic president, even though I didn't agree with all of the positions that they advocated. Your candidacy ought to enjoy similar support, and I'm going to encourage my colleagues on both sides of the aisle to join with me in advancing your nomination.
(03:13:39)
I appreciate your taking the time that you have taken to work with us over the past few weeks to get this process to this point, and with that, I would like to remind my colleagues that the deadline for submitting any questions for the record is 5:00 p.m. today. And without anything else, this hearing stands adjourned.