HOUSE APPROPRIATIONS COMMITTEE — SUBCOMMITTEE ON FINANCIAL SERVICES & GENERAL GOVERNMENT HEARING
For questions on the note below, please contact the Delta Strategy Group team.
On May 6, the House Appropriations Committee Subcommittee on Financial Services and General Government held a hearing on oversight of the U.S. Department of Treasury, with Treasury Secretary Scott Bessent as the witness.
Below is a summary of the hearing prepared by Delta Strategy Group. It includes several high-level takeaways, followed by summaries of opening statements.
Key Takeaways
The following is a summary of the main topics explored in the hearing, with further details in the Discussion section below.
- Bessent outlined the three components of the administration’s economic agenda as trade, tax cuts, and deregulation, designed to drive economic growth and domestic manufacturing. He cited the wide-ranging benefits of tax cuts and discussed how tariffs incentivize reshoring jobs alongside promoting fair trade. He reiterated that making the Tax Cuts and Jobs Act (TCJA) permanent is preferable to an extension.
- Bessent discussed the ongoing tariff negotiations and offers from seventeen partners, excluding China, and voiced his expectations that eighty to ninety percent of those agreements will be struck by the end of the year, if not sooner. He stated that several countries have been responsive and have already submitted strong offers.
- Bessent raised how non-tariff barriers pose more trade risk and distortions than tariffs, citing China’s continued accumulation of large surpluses despite existing tariffs. He said he expects a substantial reduction in the tariffs imposed on the U.S., in addition to negotiated measures to address non-tariff barriers, currency manipulation, and subsidies for labor and capital investment.
- Bessent said issued a warning the U.S. is approaching Treasury’s “X” date for the U.S. default on its debt, but emphasized the U.S. government will never default, pledging a clean debt ceiling extension. He attributed bond market volatility more to the unsustainable level of U.S. debt than to the impact of tariffs. He warned that, absent a course correction, the U.S. risks drifting into a stagnant, high-spending economy.
- In response to a question from Representative Edwards (R-NC) about the proposed central bank digital currency (CBDC) Anti-Surveillance State Act, Bessent argued that digital assets belong in the private sector and opposed the issuance of a CBDC. He noted that foreign entities hold U.S. dollars due to the broad range of investable U.S. assets, not for transactional ease, and he argued that a CBDC would only be necessary in an economy lacking investment options.
- Committee Ranking Member DeLauro (D-CT) called for continued pressure to maintain the U.S. competitive edge in investment markets and strong enforcement mechanisms to prevent strategic investment outflows to China. Bessent characterized the outbound security program as a source of visibility to prevent China from exploiting U.S. investment. He emphasized the importance of allowing time for Treasury’s process to advise any statutory framework alongside legislating with flexibility and durability.
- Committee Ranking Member DeLauro emphasized the relationship between de minimis and preserving the vitality of the U.S. textile industry, citing it as a matter of national security with wide-ranging economic implications and supporting the administration’s efforts to close the de minimis loophole.
- Democrats, led by Committee and Subcommittee Ranking Members DeLauro (D-CT) and Hoyer (D-MD), pressed Bessent on concerns about recent administration actions taken that reduce funding for agencies such as Treasury. Bessent responded that recent decisions and ongoing efforts are centered on decreasing inefficiencies and addressing flaws in oversight.
- Representative Pocan (D-WI) and others criticized the tariffs, arguing that Main Street, not Wall Street, will pay the additional costs. Representative Gluesenkamp Perez (D-TX) asked how tariffs would ensure upward pressure on wages, with Bessent noting that the key to upward pressure on wages is more job opportunities.
SUMMARY
Opening Statements and Testimony
Subcommittee Chairman Dave Joyce (R-OH)
Whether it be taxes or tariffs, rightsizing regulation, or creating a regulatory framework for digital assets, Treasury’s role is fundamental to their resolution. Treasury’s work does not happen in a vacuum; it takes cooperation, transparency, and accountability. We need to understand its operational priorities and how the Department is deploying resources across its divisions and bureaus and why. There are definitely efficiencies to be identified, but changes need to be thoughtful and deliberate to ensure the Department’s mission is still being accomplished.
Subcommittee Ranking Member Steny Hoyer (D-MD)
The Trump administration’s irresponsible, incoherent tariff policy has plunged the American and global economies into chaos. The stock market fell more in the first 100 days of the Trump administration than in the first 100 days of any presidency in the past half century. That uncertainty has also rattled the bond market, with investors dangerously starting to doubt the full faith and credit of the U.S. Our economy is in chaos and so is our government as consumers and industries struggle to navigate ever-changing tariffs. The administration is orchestrating an illegal purge of federal employees, oblivious to the devastating consequences of their actions to critical services the U.S. relies on. Devastating actions and funding cuts at IRS and every other government office have bludgeoned morale, destroyed efficiency, and increased waste. As Republicans undermine the ability to enforce our existing tax code through funding cuts, they are also pursuing massive tax cuts for the wealthiest among us. Treasury needs to be the adult in the room to manage this uncertainty, with the responsibility to communicate clearly and transparently. I am also curious about our economic approach to the Russia-Ukraine war, especially regarding last week’s mineral deal and recent questions about our sanctions regime on Russia.
Treasury Secretary Scott Bessent
Treasury is eager to work with Congress to fund key priorities to strengthen our economy and coordinate the President’s budget as soon as it is released. There are a range of the Department’s efforts to boost U.S. economic growth, improve government efficiency, and target illicit actors that threaten our national security. The core components of the Trump economic agenda are trade, tax cuts, and deregulation. These are not standalone policies, but interlocking parts of an engine designed to drive economic growth and domestic manufacturing. Tax cuts and cost savings from deregulation raise real incomes for families and businesses. Tariffs create an incentive for reshoring jobs and fair trade. Deregulation complements tariffs by making it easier to invest in energy and manufacturing projects, and this agenda is already bearing fruit. Spurring job growth is just as important as wrangling inflation, with this administration continuing to make tangible progress. The CPI for energy goods declined in March as did the price index for core goods. While the cost of goods is decreasing, so are energy prices. We are complementarily focused on improving efficiency across all levels of government, but particularly the significant and bipartisan reforms needed for the IRS to deliver efficient and cost-friendly results. In addition to making government more efficient, Treasury is committed to working alongside the White House to make America safe again, launching a maximum pressure campaign against violent cartels, terrorist networks, and money laundering. By leveraging sanctions, we are choking off the financial lifelines of terrorists, criminals, and hackers from Mexico and Guatemala to China and Iran. The first 100 days have set the table for a robust economy that allows Main Street to grow. With Congress and the White House working hand in hand, we expect to see even more positive results over the next few months. Key to expanding economic opportunity for all Americans is making TCJA permanent to build a stronger, safer, and more prosperous America.
DISCUSSION
Representative Joyce (R-OH): How do you view the U.S.’s overarching trade strategy, and do you anticipate all trade deals being bilateral, or could there be multi-country trade pacts in which groups of countries agree to a common tariff schedule? Bessent: This will be dependent on our trade partners. There are eighteen very important trading relationships, and we are currently negotiating with seventeen of those partners, but we have not yet engaged in negotiations with China. I expect we will see a substantial reduction in the tariffs we are being charged, as well as in non-tariff barriers, currency manipulation, and subsidies for labor and capital investment. That process is proceeding very well. Many of our trading partners have put forward strong offers, and we are actively negotiating with them. This is a three-legged stool of trade, tax, and deregulation. Trade came first. According to Speaker Johnson, the House is expected to move its portion of the bill to the Senate around Memorial Day, and we are looking forward to that. Deregulation, while slower to impact the economy, is expected to deliver substantial benefits in the third and fourth quarters. By this time next year, those effects could be in full force.
Representative Joyce (R-OH): What is the actual number of countries the U.S. has started tariff negotiations with, and what is the status of those negotiations? How many do you anticipate being completed by the end of the year, in the first quarter of 2026, or in the second quarter? What are the biggest challenges you see to negotiating tariffs and securing trade deals? Bessent: Approximately 97 to 98 percent of our trade deficit is with only fifteen countries, and about eighteen percent are major trading partners. I would be surprised if we do not have eighty to ninety percent of those agreements wrapped up by the end of the year, possibly much sooner. We may be announcing trade deals with some of our largest trading partners as early as this week. They have come to us with very strong offers and they may not like the tariffs President Trump has imposed, but they are still responding to them in negotiations. If tariffs are so bad, why do they work? Even more insidious, as we have seen both in practice and in academic research, are non-tariff barriers. If you look at the period before the tariff escalation, China’s were only five percent tariffs so something else is going on if they are still accumulating such massive surpluses.
Representative Hoyer (D-MD): Do you believe we are in a recession now, and do you agree we would be in one if we have a negative growth in the second quarter, which is the traditional definition of a recession? Bessent: I believe in data, and there is nothing in the data that shows we are in a recession. In fact, the jobs report surprised to the upside. These economic numbers are subject to substantial revision, and based on detailed analysis, I believe the initial GDP estimate will be revised upward. Regarding last year, we were running a 6.7 percent fiscal deficit, the largest ever during peacetime or outside of a recession. The easy path would be to continue spending and keep the economy running, but that would be an unsustainable path.
Representative Womack (R-AR): When is Treasury’s “X” date for the U.S. to avoid a default? Bessent: We still receive a large volume of paper returns. Every Friday, I get a summary and even as of April 15, we are still tallying those. We will share with Congress when we believe we are nearing the relevant date, and that update will be forthcoming. Just like an outfielder chasing a fly ball, we are on the warning track. The U.S. government will never default. We will raise the debt ceiling, and the Treasury will not use any gimmicks.
Representative Womack (R-AR): How do you plan to maintain Treasury’s responsibilities under a budget nineteen percent smaller than FY25? Are there really $2.5 billion worth of efficiencies to be found? Bessent: We reinstituted a “work from your office” program, which we believe will improve efficiency. We have requested increased funding for key Treasury priorities, including the intelligence network and the Office of Foreign Assets Control, to better safeguards. We see significant opportunities for efficiency and productivity gains not seen before at the federal level. These are offices of government efficiency, not extinction. We estimate around $2.5 billion in potential efficiencies, with $2 billion alone in the IT department. Treasury processes approximately 1.5 billion payments annually, comparable to a midsize U.S. regional bank. Many such banks, with departments one-tenth the size and budget, have shared best practices with us. While we must maintain redundancies appropriate for a government agency and operate at a larger scale, there are still substantial savings to be realized.
Representative Hinson (R-IA): Given Executive Order 14249 directing Treasury to establish pre-certification and pre-award procedures to prevent fraud and improper payments, can you explain why these procedures were not already in place? What other parts of the Order is Treasury executing on? Bessent: What we are seeing is a complacent upper level of management across many departments throughout the government. Of the 1.5 billion payments Treasury issues annually, each is required to include a Treasury Account Symbol (TAS) to link the payment back to its appropriation. We discovered that over one-third of those payments did not have a TAS number and without a TAS, payments cannot be properly tracked or accounted for. This lack of accountability is one reason why the 450 organizations that Treasury services are unable to pass audits. We have since cracked down on this and every payment now requires a TAS number. We are trying to go more paperless with checks to protect the integrity of payments as well as cut down on costs. We have clawed back tens of millions of dollars from improper payments.
Representative Gluesenkamp Perez (D-TX): Could you expand on how tariffs would ensure that there is upward pressure on wages? Bessent: The key to upward pressure on wages is more job opportunities. What we have seen since the China shock, after China entered the WTO, was a large decrease in manufacturing jobs. Studies have shown that workers in manufacturing jobs have more potential for large-scale wage increases than service workers do. Moving more workers from service to manufacturing should do that. The administration is also trying to bring down costs for working families.
Representative Cloud (R-LA): Are bond markets more affected by the tariffs and trade concerns, or by out-of-control debt and Congress’s inability to get our fiscal house in order? Bessent: The large stock of government debt is why I am sitting here now instead of remaining in the private sector due to being alarmed by what was happening under the previous administration. This debt, at its highest level ever when we were neither at war nor in a recession, is unsustainable. It was deeply cynical, and had we continued down that path, we would have entered a malaise we could not grow ourselves out of. We likely would have been forced into a European-style economy characterized by very high government spending, a lack of innovation, and limited mobility. We have kind of been the innovation engine of the world, with a barbell economy that the Trump administration is attempting to remedy. On one side, we have financial services and the tech sector, forward-looking and the envy of the world. On the other side, we are a natural resources economy, led by energy. The previous administration refused to permit LNG facilities. What we were missing was that manufacturing jobs are the arc between. That is what we are trying to bring back.
Representative LaLota (R-NY): How did TCJA affect American job creation, employment, and wage growth? Should we extend it? Bessent: It provided a substantial non-inflationary impetus to the economy, which resulted in real wage gains on a non-inflationary basis for the American people and supported a robust economy. Making TCJA permanent would be better than extending it.
Representative LaLota (R-NY): Is it true the U.S.’s trade deficit is approximately $1.2 trillion, about $300 billion is with China? What impact do exploitative labor practices and theft of intellectual property have on the deficit? Bessent: Yes, I believe it may have increased slightly. Aside from the values concerns, it creates an uneven playing field and an unfair trading advantage. We can see that not only from the size of their debt stack but, more importantly, from the size of the large surpluses they are accumulating. I believe this is a problem not just for the U.S., but for every other country as well, and ties back to one of the core problems in trade. Without money spent on R&D, those resources can be redirected to cheap manufacturing, which helps an advantage over competitors like the U.S.
Representative LaLota (R-NY): Are tariffs a tool to reduce America’s trade deficit, specifically with China, and a tool to protect American jobs? Bessent: Yes, absolutely.
Representative Edwards (R-NC): What is the administration’s perspective on the role of digital currency, with the proposed CBDC Anti-Surveillance State Act that would prevent the Federal Reserve from issuing a central bank digital currency (CBDC)? Bessent: We believe digital assets belong in the private sector. My personal view is that having a CBDC is a sign of weakness, not strength. The real reason a reserve manager or foreign central bank holds U.S. dollars is because of the wide variety of U.S. assets they can invest in. You would only create a CBDC for ease of use if there were no good choices for underlying assets. I would not be in favor of Federal Reserve issuance.
Representative Edwards (R-NC): At what point would our debt levels become unsustainable, and what would that look like? How close do you think we are? Bessent: It would look like a sudden stop to the economy, as credit would disappear and markets would lose confidence, but I am committed to that not happening. It is a tipping point, and debt sustainability is very difficult to pinpoint, but what is not difficult to pinpoint is the trajectory and the trajectory is unsustainable. When and if the markets were to rebel against us is very difficult to know. It is very important not to go on the warning track. We have got to get to the other side of this and start reducing the debt. The debt numbers are indeed scary, but Secretary Yellen and I both agree the debt-to-GDP is the important number. We are trying to both control the absolute level of debt, pay it down, and also grow the GDP. The market is more concerned about the trajectory as unsustainable or “bending the curve.” The goal here is both to bend the curve and to grow the denominator, using growth and spending constraints.
Representative Edwards (R-NC): What role is DOGE playing in delaying that tipping point and helping to reverse our current fiscal trend? Bessent: DOGE, or any other measure to constrain spending, is admirable, important, and necessary. We do not have a revenue problem. We have a spending problem, and we have to bring the spending under control.
Representative DeLauro (D-CT): Given the bipartisan consensus on the need for an outbound investment screening regime and funding already appropriated for Treasury to implement the Executive Order, do you support moving forward with its implementation? Bessent: This is a very important issue, as the outbound security program is an important, neutral tool in our effort to restrict the PRC from exploiting U.S. investment. The program just began a few months ago, and while we are still learning, we anticipate gaining important visibility into U.S. persons’ investments involving PRC energy. We appreciate the interest from Congress, and while legislation is important and helpful, I would like some time for our process to inform any legislation. We would like any legislation to be both flexible and durable.
Representative DeLauro (D-CT): Has your support for an outbound investment screening regime changed, what is the status and timeline of the Executive Order review, and will Treasury fully enforce it? Bessent: I have not changed my position. We are looking at what is working, what is not, and what the best enforcement mechanisms are. When a bill comes forward again, we want it to be fulsome and doable as a 2025 bill that accounts for all nuances.