Washington Post columnist Catherine Rampell writes that Scott Bessent “is using all the budget high jinks at his disposal to produce a pseudoscientific plan that’s rosier, more magical and more paper-thin than the past several decades of GOP budget fantasies.” As a former macro trader, Bessent would no doubt share Rampell’s disdain for rosy economic plans after having profitably committed capital against more than a few over the decades.
At the same time, Bessent’s past earnings might logically give Rampell pause before being so disdainful of Bessent. Having made lots of money betting against nonsensical economic fantasies, wouldn’t Bessent be far too smart craft his own? The speculation here is yes, even though Rampell makes a few good points of her own in her critique of Bessent.
What’s Bessent’s economic plan? It’s “3-3-3.” In a Wall Street Journal editorial’s words, it can be broken down to “a sustained 3% growth rate for gross domestic product, a federal fiscal deficit no more than 3% of GDP, and an increase in domestic oil production of 3 million barrels a day.”
About the first 3, and ignoring the foolishness of GDP as a reasonable measure of anything, Bessent could perhaps be convinced that 3 percent growth reads as eminently doable precisely because it’s so small. Never forget that economies are people, and people can surely improve at rates greater than 3 percent on an annual basis. We know this because corporations are but a collection of people, their valuations are a market measure of all the dollars they’ll earn in the future, after which we can say that the expected future earnings of corporations routinely exceed 3 percent.
Not surprisingly, Rampell disagrees. Writing as though the U.S. economy is a static machine, Rampell contends via “nonpartisan public forecasts” that “U.S. economic growth is expected to settle around 1.8 percent annually.” The tiny number speaks firstly to the weakness of the measure (think GDP again), but also to Rampell’s own analysis. She writes that the main obstacle to greater amounts of growth (including Bessent’s 3 percent) “is demographic: More workers aging into retirement, fewer babies being born.” The latter is Rampell promoting a bit of her own pseudoscience.
Rampell’s analysis imagines that humans are static creatures incapable of enhanced productivity. More realistically, the capacity for humans to produce in exponentially greater fashion expands by the day as the number of specialized hands and machines at work in the production of everything expands. Better yet, stop and think about if AI and its various adjacent technologies live up to even a fraction of their potential. If so, human production will be of the superhuman variety such that fewer babies being born will individually produce on the level of hundreds and thousands of babies from the present and past.
It’s all a reminder that if anything, Bessent is underselling economic growth potential at the same time that Rampell is modeling human potential back down into the Dark Ages. Score one, and more, for Bessent.
Rampell is more compelling on the matter of increased domestic oil production, though she perhaps doesn’t fully know why. Up front, it will be said right here that oil is easily the most important and essential commodity on earth when it comes to economic progress. We would be desperately poor without it.
At the same time, it should be said that the greatest growth decades for the U.S. of modern times (the 1980s and 1990s) occurred at a time when domestic U.S. oil production was near non-existent. The two are directly related more than people realize. Important as oil extraction is, it’s performed in some of the most economically backwards (think Venezuela, Saudi Arabia, Equatorial Guinea, Iran, etc.) nations on earth. Economics is about tradeoffs, at which point increased energy extraction stateside has to occur at the expense of other economic activity that the rest of the world is not capable of.
Rampell makes the point that assuming soaring extraction stateside brings down the price of oil, the lower price will wreck the economics of extraction in the U.S. Think the 1980s and 1990s again. Oil was too cheap for American producers to extract, which is paradoxically why the U.S. economy boomed so profoundly. Imports are bullish, including imports of a crucial commodity that’s globally abundant.
As for budget deficits, Rampell thinks debt and deficits are a function of too little tax revenue, Bessent says they’re a function of too much spending. The bet here is that both could be persuaded to rethink their stances.
Just as economies are people, governments are backed by them. Deficits and debt are large in the U.S. because its Treasury has taxable access to the present and future earnings of the most productive people on earth. In other words, deficits and debt are an effect of too much tax revenue now, and much worse, the expectation of exponentially more tax revenue in future. We have a too much revenue problem that plays into Bessent’s proper vision of reducing the tax burden.
For now, Rampell is just too pessimistic while Bessent’s 3-3-3 perhaps signals that he isn’t optimistic enough. Economies are once again people, and the capacity for individual growth is limitless.
