Scott Bessent: Fixing the Fed, Tariffs for National Security, Solving Affordability in 2026

Bessent says deficit reduction is now the administration’s central fiscal test, with deficit-to-GDP expected to fall from 6.8% to the mid-5s and a “3” targeted before Trump leaves office. He forecasts a $200–300 billion calendar-year fiscal contraction after the annual deficit narrowed from about $1.8 trillion to $1.78 trillion.

Tariffs are being used mainly as negotiating and national-security leverage, not as a permanent revenue stream. Bessent expects tariff income to fall as reshoring lifts domestic taxes, and said a Supreme Court loss on IEEPA would still leave Sections 301, 232 and 122 as alternative trade authorities.

Bessent explicitly said restoring Main Street affordability is a two-to-three-year project, not something the administration can deliver in one year. He distinguished falling inflation from still-high price levels, acknowledged households remain angry about accumulated costs, and argued that lower gasoline, rents and rising real incomes should improve conditions.

Bessent wants the next Fed chair to shrink the institution’s economic footprint and make policy more predictable, with extraordinary asset purchases reserved for genuine emergencies. He said the Fed is losing about $100 billion annually and that he interviewed 11 chair candidates, several of whom favor reducing the Fed’s role and guidance machinery.

Treasury’s deregulation push is aimed heavily at community banks because Bessent believes post-2008 rules made them “too small to succeed” and restricted Main Street credit. He said roughly half have disappeared since the financial crisis even though they still provide about 70% of agricultural and 40% of small-business lending.

The administration is deliberately taking equity stakes in a small group of strategic industries, framing the intervention as national-security policy rather than a broad embrace of state capitalism. Bessent said five to eight sectors require domestic or hemispheric capacity, citing semiconductors, pharmaceuticals, steel and shipbuilding.

Bessent expects a substantial household cash injection in early 2026 because new tax provisions are retroactive while most workers never adjusted withholding. He said many households could receive $1,000–$2,000 refunds, alongside tax breaks for tips, overtime, Social Security and interest on loans for American-made cars.

The administration sees “Trump accounts” as a long-term attempt to turn every American child into an equity owner, not merely another savings program. Each child would receive $1,000 at birth; families and employers can add money, the Dells pledged $6.25 billion, and Bessent said about 20 states may contribute.