David Lauder
WASHINGTON (Reuters) - President-elect Donald Trump's pick for Treasury secretary Scott Bessant said on Thursday the dollar should remain the world's reserve currency and the Federal Reserve should remain independent and be prepared to impose tougher sanctions on Russia's oil industry sanctions.
Testifying at a Senate Finance Committee confirmation hearing, Bessant stressed the urgent need to extend Trump's 2017 personal tax cuts and said they would cost $4 trillion if they were allowed to expire at the end of the year. tax increases that could crush the U.S. economy.
"If we don't renew and extend our contracts, then we're going to be facing financial disaster," Bessant said. "We're going to see a huge tax increase on the middle class."
Bessant, a hedge fund manager and founder of Key Square Capital Management, expressed support for Trump's plan to impose high tariffs, saying the move would combat unfair trade practices, increase revenue and increase the United States' negotiating leverage, including on non-trade issues. chips.
In prepared remarks, he said tax, investment, trade and energy policies that promote growth will usher in a "new golden age of economics" of prosperity.
Russian oil sanctions
Bessant said U.S. sanctions on the Russian oil industry are too weak, in part because the Biden administration is too worried about rising oil prices while limiting U.S. oil production. He said increased U.S. oil production would help impose tougher sanctions on Russian oil majors.
"I think if any official in the Russian Federation is watching this confirmation hearing, they should know that if I am confirmed and if President Trump asks for it as part of his strategy to end the war in Ukraine, I will 100 percent agree to step up The level of sanctions, especially those targeting Russian oil majors, is such that it brings the Russian Federation to the negotiating table,” Bessant said.
He also had harsh words for China, calling it "the most unbalanced, unbalanced economy in the history of the world" that is trying to export its way out of a "severe recession/depression" and that the United States cannot allow China to be cheap Goods flood U.S. or world markets.
no drama
If confirmed by the Senate, Bessant would be the first openly gay Treasury secretary and a confirmed Cabinet member under a Republican administration. The South Carolina native's husband, former New York City prosecutor John Freeman, and their two children, Cole and Caroline, sat behind him.
In a hearing with few heated exchanges, Bessant calmly answered questions ranging from the child tax credit to the impact of tariffs on farmers, not straying from answers consistent with those of previous Republican Treasury nominees but not Contradicts Trump's policy plans.
He said U.S. spending on President Joe Biden's clean energy tax credits is "grossly out of control" and that high deficits in recent years are due to "spending problems." Asked whether the 100% tax credit for corporate research and development needed to be reinstated, he said he was "inclined" to support that.
Democrats accuse Bessent of using a tax loophole to reduce the Medicare tax paid by his hedge fund by $910,000 over three years, and the IRS disputes the legality of the loophole.
"This is exactly the kind of abusive scheme that makes Americans sick of our tax system," said Sen. Ron Wyden, the committee's top Democrat.
Bessant said he will set aside funds to pay the taxes owed once the case is decided. He promised to close Key Square if his nomination was confirmed to avoid conflicts of interest.
Fed independence
Markets are expected to closely watch Bessant's comments about maintaining the Fed's independence for clues on whether Trump will try to exert control over the central bank, as the president-elect has frequently complained about the central bank's interest rate decisions.
But Bessant firmly supports the Fed's monetary policy independence, adding that Trump will still express his views.
"I think the Federal Open Market Committee should be independent when it comes to monetary policy decisions," he said, referring to the Federal Open Market Committee, the Fed's rate-setting group.
While some economists say Trump's plan to impose tariffs, cut taxes and curb immigration will stoke inflation, Bessant disagrees, saying Trump's plans, including increasing energy production, will put inflation at risk. rate to the Fed's 2% target while raising wages.
Although Trump has long complained that a strong dollar hurts U.S. exports, Bessant said: "It is critical that we make sure the dollar remains the world's reserve currency."
Bessant also rejected the idea of the Federal Reserve establishing a central bank digital currency, saying the dollar’s widespread use and security made it unnecessary. He said he was open to the idea of creating a U.S. sovereign wealth fund, but said the U.S. needed to control short-term deficit growth first.
High debt, low production capacity
Bessant has vowed that there will be no debt default on the U.S. Treasury debt under his watch. Asked whether Congress should waive the federal debt limit, Bessant said he would work with Congress to make it happen if Trump asked for it.
Citing the Great Depression of the 1930s, World War II and the recent COVID-19 pandemic as examples, Bessant said high debt levels mean less ability to borrow heavily to deal with crises.
"The Treasury Department and the entire administration and Congress used their borrowing power to save the commonwealth, save the world and save the American people," Bessant said. "With the situation we have now, it's very difficult for us to do the same thing again."
(Reporting by David Lawder, additional reporting by Ann Saphir and Bo Erickson; Editing by Tom Hogue, Nick Zieminski, Alistair Bell and Raju Gopalakrishnan)