Treasury Secretary Scott Bessent said Sunday that the Trump administration’s recent cutbacks in government spending have been a key, albeit “unnoticed,” factor in strengthening the U.S. economy and helping to avoid a looming recession.
Appearing on CNN’s “State of the Union,” Bessent argued that the reduction in federal expenditures should prompt the Federal Reserve to continue lowering interest rates. His comments followed the Fed’s latest quarter-point rate reduction, which set the benchmark in the 3.75%-4.00% range.
CNN’s Jake Tapper questioned the Treasury Secretary about the risk of a recession, referencing warnings from the Fed that rapid rate cuts could trigger an economic downturn.
Bessent responded by calling the current situation a “transition period,” highlighting that government spending for the fiscal year ending September 30th was actually less than the previous year.
“What has gone unnoticed during the shutdown is, for the fiscal year, that in September 30th, the government spent less than it did the year before,” Bessent stated.
He noted that because GDP grew, the deficit-to-GDP ratio decreased from an unprecedented 6.4%-6.5% (for a non-wartime, non-recessionary period) to 5.9%. This contraction of government spending, he argued, directly combats inflation.
Citing a recent MIT study, Bessent pointed out that 42% of the “great inflation of 2022” stemmed from excess government spending. “So if we are contracting spending then I would think inflation would be dropping. [If] Inflation is dropping then the Fed should be cutting rates,” he concluded.
Aiding the Transition
The Trump administration, with assistance from the Department of Government Efficiency (DOGE), made significant spending cuts earlier in 2025, claiming savings of an estimated $214 billion. The administration publicized these cuts as exposing agency programs misaligned with the President’s agenda.
Bessent’s remarks underscore the administration’s belief that its fiscal restraint is doing the heavy lifting to cool the economy, a job he implied the Fed should “assist with” by further reducing rates.
Recessionary Sectors
Tapper pressed Bessent on whether a failure by the Fed to continue cutting rates could lead to a broader recession.
Bessent expressed confidence in the overall economy but acknowledged that certain sectors are already experiencing a recession, attributing some of the “distributional problems” to the Fed’s prior policies.
- He specifically called out housing, noting that high mortgage rates are the “biggest hindrance” and that lower rates could “end this housing recession.”
- He also highlighted the impact on low-end consumers, who are “getting killed” by high rates because they are burdened with debt rather than possessing assets.
Bessent’s view of a “transitory” economy—a period of shifting, unstable conditions—contrasts with the usage of the term by former Biden Treasury Secretary Janet Yellen, who had used it to suggest inflationary spikes were only temporary due to pandemic-related supply shocks.
The Fed made its second rate cut in October amid the ongoing government shutdown, which has delayed the release of critical economic data. The central bank’s rate policy has been a source of tension, with President Trump having publicly urged the Fed to lower rates since the summer.
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