Scott Bessent’s Failed Attempt at Coherent Economic Policy

By Veronique de Rugy

Wednesday, May 07, 2025

 

Scott Bessent, Treasury secretary in the second Trump administration, just published a piece in the Wall Street Journal that reads more like campaign spin than sound economic analysis or strategy. In it, he insists that tariffs, tax cuts, and deregulation form a “coherent” growth agenda. But no matter how much lipstick he slathers onto this pig, it remains a barnyard animal: Tariffs remain economically destructive, Trump’s tax plans are fiscally reckless without a serious agenda to cut spending, and deregulation — while essential — will be hard to implement and might not be able to compensate for all the Trump chaos.

 

Let’s start with tariffs, because these are the biggest and most dangerous part of this administration’s economic strategy — and the one Bessent tries hardest to whitewash. He repeats the tired claim that tariffs are a tool for “rebalancing” trade and rebuilding the industrial base in the name of American workers. (By the way, American workers — Bessent fails to mention — are doing better than any workers anywhere in the world.) But we’ve seen this movie before. During Trump’s first term, the tariffs didn’t miraculously reshore supply chains or deliver a manufacturing renaissance. Instead, they raised costs for American consumers and producers, punished U.S. exporters with retaliation, and triggered investment uncertainty that chilled business confidence across sectors.

 

In his second term, Trump has more than doubled down, with his at-a-minimum 10 percent universal tariff (tariffs for all except for the swamp exemptions, that is). And because every day brings another random insanity, Trump has even slapped a 100 percent tariff on foreign films. (Because why not?) This isn’t policy; this is juvenile whimsy with real economic consequences.

 

The randomness of these tariff decisions reinforces the single most destructive feature of Trump’s trade policy: uncertainty. With tariff regimes shifting often , business leaders can’t plan. The mere possibility that Peter Navarro — whose hostility to global commerce borders on paranoia — could once again be running trade policy is enough to keep capital on the sidelines. Until Trump’s team stops wielding tariffs like posts on X or Truth Social, the economy will remain trapped in a cloud of unpredictability.

 

It’s disappointing — but not at all surprising — to see Bessent cite as justification for this trade-war revival the controversial “China Shock” research by David Autor, David Dorn, and Gordon Hanson. The research has been widely discussed, but what Bessent conveniently omits is that in the more than a decade since its first began appearing, dozens of subsequent studies have sharply criticized its methods, causal claims, and policy implications. More recent and robust research has shown how dubious is the claim that China’s WTO accession was the principal driver of U.S. job losses and that trade with China was a principled driver of hollowing out communities. AEI’s Scott Winship recently wrote a fabulous and comprehensive post surveying all the literature here.

 

Here is a summary of Winship’s finding: “Studies reassessing the ADH analyses have found the China shock had a much smaller negative impact on exposed [Community Zones]’ manufacturing employment — or a Positive One.”

 

Like much of the MAGA economic narrative, this selective reading of the literature ignores nuance, overstates causality, and weaponizes outlier findings for political ends. It’s unserious and dishonest, but it’s on brand. It’s the same pattern that leads the administration to praise the tariff-ridden 19th century as an economic golden age — while ignoring the enormous body of evidence showing that those policies were neither the source of U.S. growth nor replicable in today’s global economy.

 

The fact that a once-serious figure like Bessent is now trafficking in these distortions suggests that the economic dishonesty of MAGA politics is, unfortunately, contagious. Equally disappointing is the fact that Bessent misses the opportunity to talk about the many actual government policies that are truly harming workers and creating disincentives to work, and the resulting pain for their families and communities.

 

Then there’s the tax agenda. Bessent insists that making the Tax Cuts and Jobs Act (TCJA) permanent will unleash growth. There’s no doubt that letting the tax provisions expire will hurt growth and inflict tons of pain all around. But he talks as if extending the tax cuts is the equivalent to cutting taxes, and it’s not. Markets, businesses, and households have long assumed that the TCJA provisions would be extended. Whatever marginal boost those cuts offered in 2017 has already been baked into expectations. With the exception of making full expensing permanent and a few other provisions, extending these already lower tax rates now is the economic equivalent of keeping the engine running, not adding more fuel or greater horsepower.

 

Moreover, Trump is not just extending the TCJA — he’s busy carving out new, politically targeted exemptions: no taxes on tips, on overtime, or on Social Security income. These moves might sound good in a speech, but they make the tax code more convoluted and less economically efficient. They will add to the 170 or so tax expenditures we have already and take us further to from the ideal tax code that we want.

 

Worse, these tax cuts won’t pay for themselves. That means more borrowing at a time when interest costs are high, and interest payments are a fast-growing budget item, and the debt burden is already dragging down growth. Bessent seems to think we can tax-cut our way to prosperity (which is a contradiction because he also seems to think we can tax-hike our way into prosperity with the tariffs) while ignoring fiscal constraints. That’s magical thinking, not sound economics.

 

As for deregulation, yes, in theory it’s great. In practice, it’s much harder. The Trump administration is again promising to “unleash” American energy, manufacturing, and AI development by slashing regulations. Even where executive deregulation is legally possible, lawsuits, bureaucratic inertia, and public backlash can slow or block implementation. That’s why sustained and broad-based deregulation often benefits from political alignment between the executive and legislative branches. This administration, so far, has offered little sign that it cares about such alignment. With an eye on the 2026 midterms, Republicans should be very cautious: At this pace, there’s a real risk they’ll lose their majorities in both houses next year. If that happens, Trump’s deregulatory agenda will be very diminished. And with it, the ability to unleash real growth in this country.

 

Worse still, Trump’s nationalist allies on the Hill seem far more enamored with economic interventionism than deregulation. They don’t want to liberate markets; they want to redirect markets toward “national greatness” by using industrial policy, tariffs, and even price controls. If you think a second-term Trump administration wouldn’t find common ground with Democrats on protectionism, corporate micromanagement, and entitlement expansion, you haven’t been paying attention.

 

In the end, Bessent is peddling a false story of a “coherent” economic plan. But it’s a plan built on broken assumptions. Tariffs will not grow the economy; they will shrink it. Extending existing tax provisions, while piling on new carve-outs, will add government debt without adding economic dynamism. Full-scale deregulation is the most promising part of the agenda, but it’s the most difficult to deliver, especially amid the undisciplined larger agenda.

 

The Trump economic agenda, as it stands, is a mix of rose-colored nostalgia, economic nationalism, and fiscal denialism. This mix might score political points. But it won’t produce lasting prosperity. For that, we need something entirely absent from Bessent’s op-ed: respect for markets, restraint in policy, and consistency in execution.