SENATE FINANCE COMMITTEE HEARING WITH TREASURY SECRETARY BESSENT
On June 12, the Senate Finance Committee held a hearing with Treasury Secretary Scott Bessent.
Key Takeaways
- Committee Republicans, led by Chairman Crapo (R-ID), outlined support for passing the One, Big, Beautiful Bill’s targeted tax relief by permanently extending the 2017 Tax Cuts and Jobs Act (TCJA) and preventing a $4 trillion tax hike. Secretary Bessent reiterated how the Bill and permanent extension of TCJA tax cuts will provide certainty and build economic momentum, warning that failure to pass it would cause a sudden stop of the economy with cataclysmic implications.
- Chairman Crapo emphasized the U.S. is facing a spending problem, not a revenue problem, as he highlighted how the Bill is working to provide certainty, lower the deficit, and restore broad-based prosperity. He noted that the $1.5 trillion in mandatory spending reductions is targeting pandemic-era and Biden-era waste, fraud, and abuse.
- Secretary Bessent discussed how the administration’s agenda is rebalancing the global economy and cited the U.S.-U.K. trade deal as a preview of what is to come, highlighting its creation of a $5 billion export opportunity for U.S producers. He outlined the U.S.’s eighteen important trading partners and how the largest trading partners also constitute the largest trade deficits, emphasizing that the administration is working deliberately to reduce uncertainty without ceding an opportunity to correct forty years of bad trade policy.
- Chairman Crapo (R-ID) supported the administration getting back in the game with trade and highlighted how countries engaging in negotiations as a result, criticizing the Biden administration for not engaging in any bilateral trade negotiations. Senator Grassley (R-IA) discussed the importance of finalizing two or three deals to deliver certainty while also providing fair market access for U.S. goods and opening much-needed markets.
- Senator Daines (R-MT) called for continued engagement with China alongside their accountability to prior commitments made under the first Trump administration. He highlighted the administration’s priorities of securing fair market access for American agricultural producers, alongside addressing both tariff and non-tariff trade barriers to achieve a more equitable trading relationship.
- Senator Young (R-IN) called for pursuing a smarter trade strategy and forming a united global front against China’s predatory trade practices instead of using tariffs as an “economic scattergun.” He noted concerns that unilateral tariffs may raise input costs for U.S. manufacturers without changing China’s behavior, citing a Wall Street Journal editorial that called for a more strategic approach. He supported the reset of broader trade relations, advocating that it needs to come before directly confronting China’s predatory practices. Secretary Bessent highlighted trade negotiations using the Organization for Economic Co-operation and Development (OECD) and China’s non-membership, stating that it is a two-step process of establishing trade deals and fair trade with allies before worrying about China.
- Senator Grassley (R-IA) called for Secretary Bessent’s commitment to meaningfully address 45Z, citing the Biden administration’s failure to, and work with industry to ensure that it works for farmers. Secretary Bessent referenced his January meeting with Senators Grassley and Marshall (R-KS), affirming his commitment to ensure robust implementation while preventing a back door for foreign actors.
- Senator Cantwell (D-WA) questioned how the U.S. is playing to win without a rules-based system to trade, cautioning against negotiations becoming more ad hoc while calling for the U.S. to set rules and ensure adherence. She emphasized her support for bilateral and multilateral agreements, especially those that benefit trade-dependent states, in repeated calls for increased and open market access.
- Democrats, led by Ranking Member Wyden (D-OR), criticized the administration’s priorities on trade and tariffs, focusing questions on how consumers pay higher prices from tariffs. Secretary Bessent emphasized that nothing has been passed on, citing no tariff-driven inflation and no tariff recession, alongside the lack of data that consumers bear the burden.
- Ranking Member Wyden (D-OR) criticized the Bill as a “legislative wrecking ball” that includes detrimental provisions, from cuts to nutritional assistance to sunsetting clean energy investments. Senator Bennett (D-CO) emphasized that the Bill is not close to being paid for, citing the Congressional Budget Office’s (CBO) projection of a $2.4 trillion increase to national debt. He also raised how the Bill will push the deficit-to-GDP ratio up to seven percent from the three percent target, noting the higher ratio as one Secretary Bessent previously said was unsustainable.
SUMMARY
Opening Statements and Testimony
Chairman Mike Crapo (R-ID)
Coming directly from critical trade negotiations with China, the Secretary and U.S. Trade Representative Greer made progress. I strongly support this engagement and the President’s policy to press China to open up to American trade. Two critical issues are the President’s fiscal year 2026 budget and ongoing tax reform efforts. The President’s economic agenda seeks to cut wasteful spending and unleash growth, simultaneously boosting jobs, wages, and revenue. The administration has reduced spending by streamlining operations, including at the IRS, where increased efficiency led to $120 billion in higher tax receipts, contradicting claims that fiscal restraint harms collections. This underscores that Washington faces a spending, not revenue, problem. A critical element of the agenda, and my top priority, is permanently extending the 2017 Trump tax cuts to prevent a $4 trillion tax hike. These cuts spurred investment, growth, and delivered benefits across all income levels, with middle-class gaining the most proportionally. Letting them expire would impose the largest tax increase in U.S. history, losing deductions and credits while small businesses face steep rate hikes. Republicans are determined to prevent this and deliver additional middle-class relief. The House passage of the One, Big, Beautiful Bill was a major step, and we are working to send it to the President’s desk. It affirms that tax reform is essential for working families and that deficit reduction should come from spending cuts, not higher taxes. Revenue as a share of GDP has held steady at seventeen percent over decades, and extending current tax policy will not increase the deficit. Republicans are pursuing over $1.5 trillion in mandatory spending reductions, targeting pandemic-era and Biden-era waste, fraud, and abuse. While some now raise procedural objections they ignored during passage of the American Rescue Plan Act (ARPA) and the Inflation Reduction Act (IRA), urgent action is needed to avert the looming tax hike. Senate Republicans are committed to providing certainty, lowering the deficit, and restoring broad-based prosperity.
Ranking Member Ron Wyden (D-OR)
This hearing could be the only opportunity the Democratic Senators have to question a top Trump official about the truly disastrous bill Republicans are writing behind closed doors. There is a legislative wrecking ball about to devastate the lives of millions of Americans. While Senate Republicans are making these small tweaks to it, millions of Americans are living on a knife’s edge and see a rigged economy that creates enormous prosperity at the top but denies it to nearly everybody else. The plan Trump and Republicans are scrambling to pass is going to do virtually nothing for them and it would make their lives worse. It is no exaggeration to say the Republican plan would ruin millions of lives to help the ultra-wealthy. Their bill is not a tax and spending cut, it is class war. The version that passed the House, which is the only text we have to go by now since this is all unfolding in secret, includes the largest cuts to health care and food assistance in U.S. history. For Trump and Republicans to hide behind the flimsy claim that this will not cut benefits is absurd and insulting. Americans will be ensnared in a thicket of red tape, costing them their benefits and making health coverage entirely unaffordable. The $300 billion cut to the Supplemental Nutrition Assistance Program (SNAP) has two million kids standing to lose some or all of the food assistance they receive today. A new study found that the Bill will cost thousands of preventable deaths each year. The Bill gives big corporations a trillion dollars in new tax breaks, and they are hiding the cost once again with budget gimmicks. It would give the top 0.1 percent of earners a tax break of more than a quarter million dollars each year. That overall Trump agenda is a big net loser, not tax reform or a spending cut, for the majority of Americans. This is a watershed moment that is going to change our country for generations to come, and it should not be playing out in secret. We are asking for an open markup, like the kind we did on clean energy taxes, with lots of debate and amendments.
Treasury Secretary Bessent
Treasury is committed to working with Congress to improve the U.S.’s finances, create new jobs, and strengthen the economy. Treasury’s efforts work to advance President Trump’s economic agenda on tax and trade. Treasury concluded its most successful filing season in years, and we did so while improving efficiencies and cutting costs at the IRS. The President was able to achieve these results while reducing $20 billion in waste on planned IT spending at the Internal Revenue Service (IRS). This success has taken place against the backdrop of one of the most consequential tax proposals ever to come before Congress: the One, Big, Beautiful Bill. The Bill will make the 2017 tax cuts permanent, providing certainty and building economic momentum. It is clearly and squarely aimed at boosting the working and middle class and reinvigorating American manufacturing. According to the Council of Economic Advisers (CEA), the Bill will raise take-home pay and increase wages. It will cement no tax on tips, no tax on overtime, and tax cuts for seniors. It will also incentivize unprecedented investment in U.S. manufacturing. The Bill will provide 100 percent expensing for new factories, as well as existing factories that expand operations and support “Made in America.” It will streamline burdensome permitting processes that often stand in the way of new manufacturing projects. It is time for the U.S. to start building things again, and the Bill makes this possible. The administration is grateful for the House’s efforts to advance the Bill and looks forward to working closely with this Committee and the Senate to get this legislation to the President’s desk. The progress we have made on tax issues over the last four months complements the significant progress we have made in rebalancing the global economy. Since I last testified before Congress in May, the President announced a historic U.S.-U.K. trade deal. This arrangement, which creates a $5 billion export opportunity for U.S producers, is a preview of what is to come. Dozens of countries have engaged the administration thus far with offers to improve their trade relations with the U.S., including China. Yesterday, I returned from successful negotiations in London with the Chinese delegation and am confident these negotiations will bring balance to the economic relationship between our two economies. China has a singular opportunity to stabilize its economy by shifting away from excess production toward greater consumption, but it needs to be a reliable partner in trade negotiations. If China will course-correct by upholding its end of the initial trade agreement we outlined in Geneva, and I believe after our talks in London they likely will, then a rebalancing of the world’s two largest economies is possible. By challenging the decades-old status quo on tax and trade, President Trump is bringing new life into the U.S. economy. More than 500,000 private-sector payroll jobs have been added since January. After four years of price increases diminishing the U.S. standard of living, inflation is showing substantial improvement due to the administration’s policies. The labor market’s strength has been exemplified in the recent performance of the stock market. The President’s bold leadership on these issues has laid the foundation for a golden-age economy. We can build on that foundation to create even greater prosperity and abundance for the U.S.
DISCUSSION
Chairman Crapo (R-ID): What would happen if Congress does not extend the 2017 tax cuts? Bessent: It would be a sudden stop and cataclysmic for the economy if it is not extended, and as always, working Americans would bear the brunt. There would be job losses, economic losses in markets, and a substantial increase in our budget deficit due to a decrease in tax revenues. It is unthinkable what would happen.
Chairman Crapo (R-ID): What would happen if we do extend the TCJA and other pro-growth provisions in the Bill? What is the importance of these tax provisions, their economic impact, and the effects of both existing and new provisions? Bessent: Making TCJA permanent will give an economic impetus to the U.S. economy through greater certainty. I have met with numerous business leaders since I was confirmed on January 28th, and while they are confident the bill will pass, but without having 100 percent certainty, they are holding back on their capital expenditure plans. Last week, they told me there is a substantial planned increase that will be unleashed in capital expenditures by U.S. and foreign corporations. TCJA led to strong, non-inflationary growth, as opposed to what we saw during the Biden years of substantial inflation. The President’s proposals for no tax on tips, no tax on overtime, making auto loans deductible for new American cars, and tax savings for seniors will benefit working Americans in the bottom fifty percent of wage earners. It is a unique combination that will provide substantial business stimulus and substantial relief to the affordability crisis that has been generated over the past four years.
Chairman Crapo (R-ID): Can you comment on looking at this bill dynamically rather than statically, starting with the CBO’s static score but then factoring in economic growth, with CEA estimates that three percent growth could generate $4.1 trillion in additional revenue? What is your view on the likely revenue impact of this Bill under dynamic analysis? Bessent: An acceleration in the growth rate is a gamechanger and a trajectory changer, and we could start seeing substantial debt paydown aside from any of the coincident tariff scoring. My guess is that you then go into a virtuous cycle because as you are paying down debt, the interest rates come down and actually be even better. I worked with the CEA on that, and we did some very regimented modeling in terms of the outcomes and what the other variables would be. There were people who were pushing for higher growth, there were people who were pushing for lower interest rates, and I think we used very realistic assumptions in there. The CEA report is extremely robust, and I think it is important to have upside surprises.
Ranking Member Wyden (D-OR): At your nomination hearing, you said Americans would not pay for tariffs, but with analysts projecting a $2,500 annual cost and major companies raising prices, do consumers pay them? Bessent: Some major retailers have chosen not to pass on tariffs to consumers. There seems to be a new version of TDS, or “tariff derangement syndrome,” and many on your side appear disappointed that there is no inflation today, with the best inflation number since 2020. There has been nothing passed on, with no tariff-driven inflation, and no tariff recession. The data does not show consumers paying for them.
Senator Bennett (D-CO): How can you square your concerns on fiscal health with deficit-financed growth? Bessent: We did not get here on our own. We inherited this fiscal situation. The high interest rates were reached during the Biden administration in October 2023, and we have not changed those rates since.
Senator Grassley (R-IA): Would you agree that trade deals need to provide certainty while also ensuring fair market access for U.S. goods, benefitting the economy and creating much-needed markets? Bessent: There are eighteen important trading partners, and definitionally, our largest trading partners also constitute our largest trade deficits. We are moving deliberately in working to reduce uncertainty without sacrificing a generational opportunity to correct forty years of bad trade policy. When countries approach us with trade offers, some of which are very good, I review their tariff schedules, non-tariff barriers, potential currency manipulation, and subsidies. I agree with the President to not blame countries for taking advantage where they could, but I do blame previous U.S. administrations for allowing it. We are moving as quickly as possible to secure the best deals. I believe we will see more agreements very soon.
Senator Grassley (R-IA): Given that the Biden administration failed to meaningfully address 45Z, and the 40B regulations showed a lack of understanding of farming, will you commit to working with Congress and farmer organizations to ensure 45Z regulations actually work for farmers? Bessent: I had my initial meetings in January with you and Senator Marshall where you both raised 45Z. I went home and did my homework. I look forward to working with your office to ensure it is implemented in the most robust way while preventing foreign actors from having a backdoor into the program.
Senator Grassley (R-IA): What will making the 2017 tax law permanent mean in terms of economic growth, job creation, and wage growth? Bessent: Full expensing was one of the most powerful aspects of TCJA, and that has tapered over the past few years. Going back to 100 percent expensing for equipment and other additions to the Bill will be very powerful. Not only do we want to make the U.S. the best place to do business in terms of energy dominance and regulation, we are also going to increase the after-tax return capital, which will allow companies to thrive here, with U.S. workers and good wages.
Senator Cassidy (R-LA): If Congress maintains the 45V credit, will you commit to working with our office to address the negative treatment the previous administration imposed on blue hydrogen by excluding natural gas paired with carbon capture and sequestration as something industry strongly supports and is actively using? Bessent: We would be happy to.
Senator Cassidy (R-LA): Is there a technical update occurring within Treasury, especially given that many federal agencies are still using outdated computer languages like COBOL? How are you addressing delays in contract fulfillment and ensuring accountability? Bessent: These tech updates are shocking in their efficiency and more shocking in the waste that has gone into them. The Treasury systems, mainly the IRS, began a tech update in 1990 that may be approaching $50 billion in total cost. Approximately $3.5 billion per year is spent, and there is no end in sight. We are working diligently to have that system off COBOL and into a workable modern programming language by the end of this administration.
Senator Johnson (R-MN): Given the dramatic rise in deficit spending under the Biden administration, from an average of $661 billion over seven years to $1.9 trillion over the last four, and CBO’s projection of $22 trillion in new deficits over the next decade, do you agree we must return to pre-pandemic spending levels to have a chance at balancing the budget? Bessent: I am committed to changing the trajectory of this, and there are two ways to do it: either through spending restraint and cuts, or through growth. That is a very difficult calculus to achieve, and we are trying to navigate it. As you said, three percent growth will change the trajectory. We must fix spending, but we did not get here overnight.
Senator Hassan (D-NH): Do Americans pay the tariffs? Bessent: Thus far, we have seen no price increases due to tariffs. Walmart has decided to pass along some portion of the tariffs and that is a private decision. Amazon and Home Depot have not. The aggregate shows that, contrary to many wishes, there has been no inflation from tariffs.
Senator Cantwell (D-WA): Do you believe in a rules-based trade regime? Do you think the administration believes in multilaterals? Bessent: The international economic system has failed the American worker. For too long, we have adhered to a system that does not work. I believe that doing the same thing again and again and expecting a different outcome is the very definition of insanity. I believe that we attempt to use multilaterals, but I believe that it has failed the American people. We have these gigantic trade deficits. There is something called the China shock, and workers were left behind, and working Americans have suffered because of this. China, the second largest economy in the world, in this multilateral system that you seem to like, is considered a developing country. Under what measure are they a developing country?
Senator Cantwell (D-WA): Do you believe that the 48D advanced manufacturing investment tax credit, created as part of the CHIPS and Science Act and important to U.S. competitiveness, should be extended? Bessent: I will get back to you.
Senator Blackburn (R-TN): As you look at permanence and the impact of the TCJA, can you speak to the difference making those tax cuts permanent would have in providing certainty needed to continue driving economic growth? Bessent: Permanence is essential. Once we pass the Bill, we will no longer be talking about tax cuts, we will be saying this is the permanent law of the land. Just as we are no longer debating the corporate tax rate, which was made permanent and has brought home significant tax revenue from overseas subsidiaries, we no longer see so-called inversions. CEOs I speak with tell me they are now paying a much higher percentage of their global income in the U.S. due to the certainty provided by the corporate tax rate. Making these provisions permanent will accelerate investment and continue to make the U.S. the best destination for capital and entrepreneurship. This permanence would benefit Main Street. Whether it is increased expensing or broader predictability, permanence provides the stability that large corporations already enjoy and that small businesses need to thrive. I believe this could usher in a whole new age of entrepreneurship.
Senator Warren (D-MA): Will this Bill’s $4 trillion in tax giveaways increase or decrease the deficit? Bessent: There is varying scoring on that. It is my view that over the 10-year window, it will decrease. If we want to take the full CBO scoring, and I do not agree with their methodology, they predict a $2.4 trillion deficit. They include that, but they have also scored $2.8 trillion in tariff income. Even in D.C. math, that is a $400 billion surplus.
Senator Luján (D-CA): Is it true that the U.S. bond rating was just downgraded? Bessent: Yes, One of the agencies did lower the U.S. bond rating. Larry Summers categorized the downgrades as lagging.
Senator Luján (D-CA): Is it still your goal to reduce the deficit to three percent of GDP? Bessent: Yes, something that starts with a three by 2028.
Senator Luján (D-CA): Does adding $2.4 trillion to the deficit advance your goal of reducing the deficit to three percent of GDP? Bessent: That is a false statement. I aggressively disagree with the CBO deficit scoring.
Senator Luján (D-CA): Do you believe that the tariffs are going to cover the cost of the Bill? Bessent: CBO scoring says $2.8 trillion of tariff income, which will cover the $2.4 trillion.
Senator Warnock (D-GA): If Republicans fail to pass their Bill, would you be willing to work with Congress on a Plan B bipartisan tax bill, one that extends the Trump tax cuts for everybody but the wealthiest? Bessent: I believe the Bill will pass. One of the reasons that we have seen Main Street not flourish is the lack of certainty. I want to see small business flourish, not more government dependency.
Senator Welch (D-VT): If I am a manufacturer or farmer paying 25 percent more for inputs like fertilizer due to tariffs and my margin is only three or four percent, are you saying I have to absorb that cost and will not be forced to raise prices? Bessent: I am happy to send you two articles, one from the Wall Street Journal and one from a Bloomberg columnist, both acknowledging surprise at the lack of inflation. The WSJ noted that the Chinese business model is heavily subsidized and structured as a jobs program, meaning they will absorb the tariffs. It could also be that the Canadian fertilizer producer will absorb it to sell to your farmer. Thus far, the empirical data supports my position.
Senator Welch (D-VT): How do you reconcile the need for stability and predictability with the Trump administration’s shifting tariff timelines, including 22 different tariff changes in just a few months leaving some manufacturers facing drastically different costs depending on the day their goods arrived? Bessent: If you are familiar with game theory, it is called strategic uncertainty in negotiations. Thirteen days ago, President Trump threatened the EU with fifty percent tariffs because the EU was not negotiating in good faith. Within hours, we had calls from five European leaders and a call with Ursula von der Leyen. You may call this a flip-flop, I call this a negotiating strategy. This is the way negotiating strategies work.
Senator Daines (R-MT): What do you see as the next steps in the negotiation to secure a comprehensive deal with China that puts U.S. farmers, manufacturers, and consumers on a level playing field? Bessent: One of the single most important economic questions of the next few years is will there be a continued decoupling between the world’s two largest economies, or is it possible to rebalance together? President Trump would like the U.S. economy to rebalance toward greater manufacturing and bring down the trade deficit. The Chinese continue to add manufacturing capacity, currently thirty percent of global capacity and up substantially since 2020 under the cover of COVID. They are in the midst of a substantial real estate downturn, some would call it a crisis, and have very low consumer spending. They need to rebalance, do more consumer spending, and address their domestic imbalances, but they cannot do that on the workers of the rest of the world. If they are willing to be good partners and approach a negotiation where the U.S. brings back precision manufacturing and high-paying jobs, and the Chinese are willing to open their economy to American products, then we could do that.
Senator Marshall (R-KS): What does the Bill mean for middle America? Bessent: The opposite tack, which I do not like to think about, is what happens if it does not pass? It is the largest tax hike in history. It could mean a sudden stop in the economy, and as always, working Americans would get hit the hardest. We would see substantial uncertainty among both consumers and businesses. What it does mean is that working families would lose their chance to cure the affordability crisis that has plagued them over the past four years due to incredible inflation. If we think about it, the affordability crisis has two components of accumulated inflation, which affects affordability, and ongoing inflation. In the Trump administration, we are getting very benign inflation numbers. As for the accumulated affordability crisis, there are two ways to address it by trying to push down costs, but the best way to address the affordability crisis is for Americans to have higher real after-tax incomes. That is what this bill does.
Senator Marshall (R-KS): How is this Bill going to impact the growth of the U.S. economy, given that we need to address spending and that first step is through growth? Bessent: Certainty and the 100 percent expensing are going to be very powerful. Companies are telling me they are holding back on capital expenditures because President Trump said in his address to Congress there would be 100 percent expensing dated back to January 20th, but they cannot be 100 percent sure this Bill is going to pass. Nothing is 100 percent, especially in Congress, until it is done. I am highly confident and think we could see a capital expenditure boom here.
Senator Young (R-IN): What is your response to the WSJ’s argument that instead of using tariffs as an economic scattergun against both allies and adversaries, the U.S. should pursue a smarter trade strategy by working with democratic allies to form a united front against China’s predatory trade practices, particularly to concerns that unilateral tariffs may raise input costs for U.S. manufacturers without changing China’s behavior? Bessent: This is a multi-step process. Our allies have also taken advantage of us. I would say the EU has been very intractable in negotiations. Many of our allies, including Canada, are about to enact a retroactive digital service tariff because we have the greatest, and really the only, internet companies outside of China, and they see a big pool of money. We will iron it out with our allies and move forward. When we put up the tariff wall on China, I told our allies, especially the Europeans, Canadians, and Australians, this merchandise is going somewhere and to get ready for it. Unfortunately for them, I was right. We are using the OECD, which China is not a member of, and we will see if China can be a reliable partner. It is a two-step of getting trade deals and fair trade with our allies, and then we can worry about China. When the President travels, he comes back with substantial investment commitments from Saudi Arabia, the UAE, and Qatar. When the Chinese leader travels, he must give money out. The Chinese can only buy friends while Americans have inbound investment. We want to keep the U.S. as the best location.
Senator Cortez Masto (D-NV): Do you think the administration’s tariff policy is an efficient way to generate revenue for the U.S.? Was it your intent to impose those tariffs to counter the $2.4 trillion deficit from the Bill? Bessent: It has several features, being an efficient revenue generator and able to rebalance decades of trade problems. Part of the intention with the tariffs has always been to raise revenues. They are coincidental, not causal. Tariffs are not taxes.
Senator Cortez Masto (D-NV): In a letter to investors that you sent in January 2024, you wrote that tariffs are inflationary and would strengthen the dollar, hardly a good starting point for a U.S. industrial renaissance. Do you still agree with that? Bessent: No, that was completely wrong.