U.S. Treasury Secretary Scott Bessant said on Tuesday (September 8) during a Q&A session at the Cox School of Business at Southern Methodist University in Dallas that he believes the U.S. can "get out of the growth trap" and escape its current debt crisis if it can achieve 3% annual economic growth. "We don't have a revenue problem, we have a spending problem," Bessant said. He stated that if the U.S. can control spending and achieve 3% growth, "we can get out of the debt trap through growth." These remarks come as the total U.S. national debt recently surpassed $40 trillion, and the annual fiscal deficit is projected to exceed $2 trillion by the end of the fiscal year on September 30.

Economic growth confidence: Manufacturing investment provides support

Bessant expressed confidence in the fundamentals of the U.S. economy. "We will weather this Iran conflict, and the underlying economy is very, very strong; I think it's accelerating again." He specifically mentioned the incentives in last year's massive tax law, which are driving the construction of new manufacturing plants, citing examples such as PepsiCo expanding its Frito-Lay, Arizona plant, opening a battery factory in Winnebago, and Boeing increasing production capacity for its Dreamliner. In Bessant's view, these cases are concrete signals that the real economy is responding to policy incentives and is expected to accelerate growth. The rebound in manufacturing capital expenditure not only reflects the direct impact of tax incentives on corporate decisions but also reflects the long-term trend of supply chain restructuring and domestic capacity expansion. Bessant emphasized that this type of real investment can gradually translate into job and output growth, thus providing more resilient support for the economy, and even if geopolitical conflicts cause short-term disturbances, the underlying momentum is expected to remain upward.

Deficit reduction path: spending control as the core, supplemented by bond buybacks.

On the spending side, Bessant stated that he is working with Lars Vought, director of the Office of Management and Budget, to develop a fiscal consolidation plan to reduce the deficit. He also noted that if the Democrats regain control of one or both houses of Congress in the upcoming midterm elections, he is not inclined to rush the plan during a lame-duck Congress. Regarding tariff revenue, Bessant mentioned that the U.S. could have collected $180 billion to cover the deficit if the Supreme Court had not overturned the president's "Liberation Day" tariffs. Furthermore, Bessant reiterated the role of repurchasing long-term Treasury bonds: "Interest rates are indeed high, but… we will do more bond repurchases, which is simply taking the most liquid portion of the bond market, liquidating it, and then giving funds to bond buyers so they can buy more." In his view, discipline on the spending side is key, while bond repurchases serve as a supplementary tool, both alleviating market liquidity pressures and improving the fiscal account structure to some extent, creating conditions for medium- to long-term deficit convergence.

Interest Rates and Energy Prices: Bessant believes high interest rates will not last.

Regarding the current interest rate environment, Bessant points out that the correlation between interest rates and energy prices is at a historical high, but he believes this relationship will break down. He predicts that within one to two years, given the current energy cooperation between the US and Venezuela and the normalization of the situation in the Middle East, the oil market will experience a supply glut. Improvements on the supply side are expected to gradually lower energy prices, thereby weakening inflation stickiness and opening up room for interest rates to decline. Bessant judges that once the energy shock subsides, the market will refocus on economic growth and employment data, and the high-interest-rate environment will be difficult to sustain in the long term. This view suggests that while policymakers are addressing short-term inflationary pressures, they have begun to reserve space for the normalization of the medium-term interest rate path, and the rebalancing of energy supply and demand will be a key turning point.

What signal does the US Treasury Secretary's "growth recovery" rhetoric send?

Bessant's remarks that "3% growth could help the US get rid of its $40 trillion debt" were generally positive for the US dollar index. The core logic lies in his emphasis on the US economy being "very strong and accelerating again," citing manufacturing investment examples to support its growth potential. Coupled with his mention of fiscal consolidation plans and bond buybacks, this reinforced the "American exceptionalism" narrative—that the US economy is outperforming other major economies, helping to attract capital inflows and support the dollar. At the same time, the signal of fiscal consolidation helps alleviate market concerns about the sustainability of US fiscal policy, reducing the dollar's credit risk premium. However, bond buybacks may bring a marginal negative impact of liquidity release, but their scale is controllable, and the pressure on the dollar is limited. Regarding interest rates, while Bessant acknowledged that current interest rates are high, he did not signal a desire for the Federal Reserve to cut rates. Combined with expectations that Trump's tariff remarks might push up inflation, market expectations for the Fed to maintain high interest rates or even raise rates were solidified. Overall, Bessant's remarks conveyed a positive signal of "growth + fiscal discipline," providing support for the dollar against the backdrop of rising expectations for a Fed rate hike in September.

Summarize

Bessant's core message can be summarized as: controlled spending + 3% growth = growth out of trouble. Despite the total US debt exceeding $40 trillion and the annual deficit projected to surpass $2 trillion, the Treasury Secretary insists the problem lies not on the revenue side but on the spending side, hoping that tax incentives will drive manufacturing investment to support accelerated growth. In the short term, bond repurchase agreements will continue to serve as a liquidity management tool. Regarding interest rates, Bessant believes the current high correlation between interest rates and energy prices will not last, and expects the interest rate environment to improve within one to two years as the energy market supply and demand dynamics change.