U.S. President-elect Donald Trump's nominee for Treasury secretary said on Thursday that the dollar should continue to be the world's reserve currency, while emphasizing the importance of Federal Reserve (Fed) independence and expressing readiness to implement stricter sanctions on Russia's oil sector.
Scott Bessent, testifying at a Senate Finance Committee confirmation hearing, underscored an urgent need to extend Trump's 2017 tax cuts, due to expire at the end of this year, to avoid a $4 trillion tax hike that could crush the U.S. economy.
"If we do not renew and extend, then we will be facing an economic calamity," Bessent said. "We will see a gigantic middle-class tax increase."
Bessent, a hedge fund manager and founder of Key Square Capital Management, voiced support for Trump's plans to impose steep tariffs, saying they would combat unfair trade practices, raise revenues and increase U.S. negotiating leverage, including on non-trade issues.
Bessent said that U.S. sanctions against Russia's oil sector have been too weak, partly because the Biden administration was too concerned about increasing prices at the same time it was constraining U.S. oil output. Increased U.S. oil production would allow for tougher sanctions on Russian oil majors, he said.
"I think 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 as part of his strategy to end the Ukraine war, that I will be 100% on board with taking sanctions up – especially on the Russian oil majors – to levels that would bring the Russian Federation to the table," Bessent said.
Bessent coolly fielded questions ranging from U.S. competition with China, to child tax credits, and did not stray from answers consistent with previous Republican Treasury nominees.
Some analysts had said markets would be scrutinizing Bessent's comments keeping the Federal Reserve independent given Trump's frequent disagreements over the U.S. central bank's interest rate decisions and his own comments about a "shadow" Fed chair.
But he came down firmly on the side of Fed monetary policy independence, adding that Trump would still make his views known.
"I think on monetary policy decisions, the FOMC should be independent," Bessent said, referring to the Fed's rate-setting panel, the Federal Open Market Committee.
Despite Trump's longstanding complaints about a strong dollar, Bessent said: "Critically – critically – we must ensure that the dollar remains the world's reserve currency."
Bessent also rejected the idea of a central bank digital currency for the Fed, saying that the dollar's wide use and security made this unnecessary.
He said he was open to the idea of creating a U.S. sovereign wealth fund, but said the U.S. needed to get control over short-term deficit growth first.
The high level of U.S. deficits means that there is less capacity to borrow heavily to combat a crisis, he said, citing examples of the 1930s Great Depression, World War II and the recent COVID-19 pandemic.
"Treasury – along with the whole of government and Congress – has used its borrowing capacity to save the union, save the world, and save the American people," Bessent said. "What we currently have now, we would be hard-pressed to do the same."
In prepared remarks released on Wednesday night, Bessent laid out a vision for "a new economic golden age" that included prioritizing strategic investments that grow the U.S. economy and making permanent Trump's 2017 individual and small business tax cuts that are due to expire on Dec. 31, 2025.
"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," Bessent also said in the remarks.
