Treasury Secretary Scott Bessent touted a drop in a key US fiscal ratio as evidence that President Donald Trump’s economic policies are working without causing a recession.
“The deficit-to-GDP now has a five in front of it,” Bessent said at a community bank conference hosted by the Federal Reserve Thursday. That’s down from a 2024 ratio “which was the highest when we weren’t at war or weren’t in a recession in US history.”
He spoke a day after the nonpartisan Congressional Budget Office published its estimate for September federal government spending and revenue figures, along with the full 2025 fiscal year numbers. Bessent noted the official Treasury data are delayed due to the current government shutdown, pending congressional passage of appropriations bills for the new 2026 fiscal year now underway.
The CBO estimated the budget gap for fiscal year 2025 was little changed from 2024, at $1.8 trillion. But using its estimate for gross domestic product, that helped shrink the deficit ratio to 5.9%. Treasury figures for 2024 show that measure was 6.4%.
Bessent has often said he decided to enter the public policy debate out of concern about an unsustainable trajectory for government debt. On Thursday he related an exchange he had with Trump about two years ago: “He looked at me, first thing, he said, ‘Scott, how are we going to get the debt and deficits down and not cause a recession?’”
Trump’s tariff hikes have spurred record customs duties, helping hold down the deficit. But the CBO figures showed spending continues to climb, while the administration’s corporate-tax cuts are eroding revenue. The agency also said interest on the public debt surpassed $1 trillion a year for the first time in 2025.
Bessent has said he wants to see the deficit ratio come down to “something with a three in front of it” by the end of Trump’s second term in office.
“We’re on our way,” Bessent said. “I think we saw that today.”
Bessent also said he expects the Treasury to issue more tax refunds next year as a consequence of changes made to the tax code under Trump’s One Big Beautiful Bill. Those include no taxes on tipped wages for certain workers, lower taxes on Social Security disbursements and the ability to deduct interest payments on purchases of American automobiles.
“We expect to see substantial tax refunds beginning of next year, which I think will be accrued to lower-end consumers — for the bottom 50% who need the relief,” he said. “And concurrently, they will change their withholding schedule so their real take-home pay will be higher next year.”
© 2025 Bloomberg L.P.
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