In recent weeks, as President Donald Trump’s trade war has battered both stocks and business confidence, Treasury Secretary Scott Bessent has declared multiple times that the U.S. economy needs a “detox.”
You might think he’s using that word to describe the current moment. The market spasms bear a kind of visceral resemblance to a physical illness. Trump has even compared the tariffs to taking medicine.
But, actually, Bessent’s “detox” doesn’t have much to do with trade. It’s about reducing government spending, and — despite all the noise around Elon Musk’s DOGE — that project hasn’t really started.
With much of Trump’s new tariff program on hold for 90 days and Congress actively debating its next budget, though, it’s a conversation that’s about to get louder. And Bessent figures to play a leading role.
In a trade context, he is viewed as a moderating influence on Trump’s most aggressive trade impulses. But on matters of debt, Bessent has the potential to be more of a hard-liner. On spending reduction, he is a true believer — and he’s assembled a team at Treasury to help him push for it.
“We are spending hundreds of billions of dollars per year in excess of what’s explained by inflation and population growth,” Deputy Treasury Secretary Michael Faulkender told me in an interview this week. “So the government’s gotten larger. They have gotten more involved in people’s lives, and there was already bloat to begin with, honestly.”
I’ve been intrigued by Bessent’s continued talk about a detox because it’s such a specific way of talking about public funding, as if it were an unhealthy drug.
He sometimes sounds like an adherent to the Austrian school of economics who believes the economy occasionally needs to be purged of excesses (though he’s argued that doesn’t mean there needs to be a recession).
“The market and the economy have just become hooked, and we’ve become addicted to this government spending,” he told CNBC last month.
When I talk to people who know Bessent — I spoke with nearly a dozen, mostly on Wall Street — they say getting the federal debt under control is an animating issue for the former hedge fund manager.
“A lot of people say it and don’t really mean it, and I think he means it,” said Sassan Ghahramani, founder and CEO of SGH Macro Advisers, who has known Bessent for many years.
“The primary motivation for Scott to want this job is I think he wants to have a legacy of having improved the debt dynamics of the United States,” Jens Nordvig, founder of research firm Exante Data, told me.
Bessent himself has said on multiple occasions that government overspending is “what got [him] out from behind his desk” to go serve in government.
But the Treasury chief is also trying to shoot the moon here — lowering deficits, even as Congress is looking at extending tax cuts that will reduce government revenues, while achieving higher growth, even as they impose some level of austerity in spending.
All of that comes against the backdrop of higher tariffs, which are already roiling markets and sparking recession fears.
Still, Bessent’s theory of the case is decipherable. From parsing his remarks and talking to people who know him, I gather the plan goes something like this: you cut spending through Congress — meaningfully, which will help cool inflation, but gradually so as not to snuff out growth. You use tax cuts and deregulation to help offset the drag on the economy. And you use tariffs to raise revenue and diversify employment opportunities in the private sector that can be taken by people leaving government jobs.
A lot of things would have to go right to pull that off.
Jim Rogers, who co-founded a hedge fund with billionaire George Soros in the 1970s and was Bessent’s very first mentor in the world of finance, spoke warmly of Bessent but said he’s skeptical that the Trump administration will actually be able to tame government spending.
It’s not as though others haven’t tried to do this, he noted.
“I know what they say, but I have seen this before,” Rogers told me recently. “Every time we’ve had a new government in the U.S., they talk about how they’re going to deal with the debt problem.”
The trouble is, austerity is painful. “People start to say, ‘Oh, this is too much pain. Let’s go back,’” he said. “We always relent.”
There are echoes of Rogers in Bessent, who had an internship with the famed investor in the summer of 1984 while he lived in a spare room in Rogers’ apartment. Rogers has warned about money printing and sounded alarms about the high level of debt, arguing last October that the U.S. was “overdue” for economic problems.
For his part, Bessent has warned that the government’s role in the economy has left it looking healthy but “brittle underneath.” He has also argued that the private sector is in recession, with the “detox” aimed at carving out a more sustainable way to drive growth.
While it’s a widely held view among economists that the U.S.’s debt path is unsustainable, I found less support for Bessent’s claims that the economy is propped up by federal dollars.
“Government spending certainly occupies an important part of the economy,” said Alan Auerbach, a professor at the University of California at Berkeley and a longtime coauthor of White House economic adviser Kevin Hassett. “I wouldn’t say it’s driving the economy.”
James Pethokoukis, a senior fellow at the conservative-leaning American Enterprise Institute, pointed to strong productivity growth as a sign that the private sector is healthy. And he said there would be market signals as to whether Bessent’s ideas have merit.
“If his theory of the case was true, which is we’ve had this sort of weird unsustainable economy, driven by debt, not by anything good happening in the private sector, [and] if he were to lay out a plan that would change that … you would expect reaction from markets to be really positive,” he said.
To back up their claims, top administration officials, including Bessent, have argued that most of the jobs added in 2024 were in government or government-adjacent sectors, a figure in which they include private health care and education.
This is true, if you buy that characterization of health care. As macro strategist Dario Perkins puts it: “This whole thing comes down to a very specific claim — that the health care sector is crowding out private job growth.”
Other data also tells a different story. Measures of the federal share of GDP — that is, the direct effect of government consumption, investment and employment on the economy — suggest the government’s contribution to economic growth is among the lowest it’s been in at least the last 75 years.
Of course, none of that means that the U.S. shouldn’t rein in its debt pile — beleaguered bond markets would welcome such a move — or that Bessent is objectively misguided to push for a smaller role for government. Federal spending in the wake of the pandemic helped feed the multi-decade-high inflation under President Joe Biden and also boosted both markets and growth.
In that sense, the “detox” has somewhat begun, Faulkender said.
State and local government still have unspent money under the American Rescue Plan, and “there’s still hundreds of billions of dollars in Covid money that is still processing its way through the system,” he told me.
“Those things are coming to an end, right?” he said.
Up next, the administration wants to pare back spending overall.
Here, Bessent has called for a gradual approach, saying he has told Republican lawmakers who want to cut quickly that $300 billion is equal to roughly a percent of GDP. Tonally, at least, that is a very different approach from the chainsaw-wielding Department of Government Efficiency gang.
“I’m not sure what a deficit hawk is, but I think I would qualify as one,” he said in an interview last month on the All-In podcast. “And a lot of the Republicans, I actually have to coax them: you can’t do this all at once.”
Next we find out if it happens at all.