Scott Bessent wins Senate confirmation as US Treasury secretary

WASHINGTON - The US Senate on Jan 27 confirmed Mr Scott Bessent to be President Donald Trump's Treasury secretary, giving the billionaire hedge fund manager a central role in shaping the new administration's policy ambitions around tax cuts and spending and managing economic relationships with allies and adversaries alike.

As the 79th Treasury secretary, Mr Bessent will have sway over the nation's tax collections and its US$28 trillion (S$37.8 trillion) Treasury debt market, with vast influence over fiscal policy, financial regulations, international sanctions and investments from overseas. 

The vote was 68-29, with 16 Democrats supporting the nomination.

Mr Bessent, 62, is already shaping up to be a forceful advocate for Mr Trump's economic agenda, which centres on reducing taxes and imposing steep tariffs that Democrats, and some economists, argue could undo some of the progress the Federal Reserve has made in getting inflation under control.

In his confirmation hearing, Mr Bessent warned that failure to renew US$4 trillion in tax cuts expiring at the end of this year would be a “calamity” for middle-class Americans, and made the case that tariffs would help combat unfair trade practices, increase revenues, and bolster US leverage in international negotiations.

He also pushed back against the idea that Mr Trump's policies would be inflationary, and said that the administration's efforts to increase oil production would actually help bring down prices.

As Mr Trump's top economic official, Mr Bessent will face a range of challenges, the most immediate of which will be managing federal cash flows after the government hit its statutory debt limit on Mr Trump's second day in office.

Even before he was sworn in, the Treasury Department was using “extraordinary measures” to avoid breaching the cap and triggering a catastrophic default.

Mr Bessent told senators in his confirmation hearing that there would be no default on his watch.

Mr Bessent will also need to deal with the prospect of rising budget deficits and added government debt estimated to run into the trillions of dollars, if tax cut extensions and other promised tax breaks cannot be offset by revenue increases or spending cuts.

If precedent holds, he will be a central actor working with Congress on the size and shape of any tax reforms.

More than 60 per cent of the federal debt is scheduled to roll over on his watch - and that is before taking into account issuance growth that has been running at more than US$2 trillion a year since the COVID-19 pandemic.

Out of control

Worries about rising budget deficits and stickier inflation have in recent weeks sent long-term bond yields up as investors demand more compensation for risk.

That in turn has driven up the average rate on 30-year fixed-rate mortgages to more than 7 per cent, a pain point with particular saliency for Americans looking to buy a home. 

Mr Bessent used his confirmation hearing to talk tough on deficits, declaring that government spending is “out of control”, though it is not clear how much he could do to rein it in.

He backed Mr Trump's pledge not to touch the Social Security retirement program and Medicare insurance plan for seniors, among the biggest line items in the federal budget, along with interest expense, determined by market rates that the Treasury does not control.

Born and raised in South Carolina, Mr Bessent says he still listens to farm radio.

He earned a bachelor's degree in political science from Yale University and has spent his career in finance, working for investors George Soros and Jim Chanos, and running his own firm Key Square.

Mr Bessent - as fifth in line to the presidency - is also the highest ranking openly gay federal official in history. He is married with two children. REUTERS