Treasury Secretary Bessent: US Economy 'Brittle Underneath'

U.S. Treasury Secretary Scott Bessent Tuesday argued that the U.S. economy is more fragile under the surface than economic metrics suggest and vowed to "re-privatize" growth by cutting government spending and regulation.

In his first major economic policy address at the Australian embassy in Washington, Bessent said that interest rate volatility, sticky inflation and reliance on the public sector for job growth have hobbled the U.S. economy despite positive top-line GDP growth and low unemployment.

In the wide-ranging speech, Bessent blamed "prolific overspending" under former President Joe Biden and regulations that have hindered supply-side growth as the main drivers of "sticky inflation."

"The previous administration's over-reliance on excessive government spending and overbearing regulation left us with an economy that may have exhibited some reasonable metrics but ultimately was brittle underneath," he said.

Bessent said that 95% of all job growth in the past 12 months has been concentrated in public and government-adjacent sectors such as health care and education, jobs offering slower wage growth and less productivity than private-sector jobs.

Meanwhile, he said jobs in manufacturing, metals, mining and information technology all contracted or flatlined over the same period.

"The private sector has been in recession," Bessent said. "Our goal is to re-privatize the economy."

Bessent said President Donald Trump's administration was working to bolster the private sector's contribution to job creation, partly by slashing regulations, extending tax cuts and rebalancing the U.S. economy through tariff policies.

Bessent said Trump's planned tariffs were an essential part of this plan, with three main goals.

"First, tariffs can increase U.S. industrial capacity, create and protect U.S. jobs, and improve our national security, he said. "Second, tariffs can be an important source of government revenue, which can help fund investments that benefit American families and companies."

He also cited it as a tool to correct and manage internal imbalances in other economies, and deter excess production and supply from other countries, such as China. He said that China could not be allowed to export deflation to major Western economies as it struggles with its own internal economic problems.

"China really needs more consumption," he said.

In deciding on reciprocal tariff rates, Trump's administration, including the Treasury, will examine a wide range of factors, including other countries' tariff rates, non-tariff barriers and currency practices, Bessent said.

Asked about how Australia, which has a free-trade agreement with the U.S., was doing in this regard, Bessent said, "so far, so good, but I'm not USTR."

He said he discussed Australia's request to be exempted from Trump's restored 25% global steel and aluminum tariffs during a meeting with Australian Treasurer Jim Chalmers. He added however that that was a matter for the Commerce Department and USTR to decide.