- Treasury Secretary Scott Bessent said the U.S. economy may be “starting to roll a bit,” as data suggests last year’s red-hot economy is slowing. Bessent said the Trump administration’s moves to transition the economy to one that emphasizes private spending over public spending may require a “detox” period.
Treasury Secretary Scott Bessent said the U.S. economy may slow as part of a “detox” due to cutbacks on government spending.
In 2024, the stock market increased by an eye-popping 24% and GDP growth was solid. Yet recent data suggests the red-hot economy of the past couple of years is pumping the brakes. The Atlanta Fed’s GDP tracker shows the economy could be headed for a 2.4% GDP contraction in the first quarter of the year, compared to a 2.3% increase in the fourth quarter. The S&P 500 index, which tracks the broader market, is also down just under 1% since the start of the year.
Bessent conceded the economy may be slowing, but only temporarily, he said in a Friday interview with CNBC.
“Could we be seeing that this economy that we inherited [is] starting to roll a bit? Sure,” he said.
But part of the reason for the slowdown is the economy’s overreliance on public spending, Bessent said, adding that the Trump administration is trying to emphasize increasing private spending instead. Since January, Trump advisor and Tesla CEO Elon Musk has sought to curtail government spending by canceling thousands of federal contracts and laying off government workers. An estimated 62,242 federal workers have been laid off so far, according to outplacement firm Challenger, Gray & Christmas.
Bessent said transitioning from an emphasis on public spending to one on private spending may require a transition period.
“There’s going to be a natural adjustment as we move away from public spending to private spending; the market and the economy have just become hooked,” Bessent told CNBC. “We’ve become addicted to this government spending, and there’s going to be a detox period.”
The Department of the Treasury did not immediately respond to Fortune’s request for comment.
Bessent also heaped blame on the Biden administration for creating a “bad equilibrium” in which he said the top 10% of Americans made up nearly half of consumption while the bottom half of Americans suffered.
A recent study from Moody’s analytics showed that wealthy consumers making $250,000 a year or more made up about half of all consumer spending, making the economy considerably reliant on a small section of the population.
To address the inequality, Bessent said, the Trump administration is aiming to lower interest rates. While the Federal Reserve, helmed by Chairman Jerome Powell, is responsible for interest rates, Bessent has previously said the administration is not focused on the Fed’s rate decisions and is instead trying to lower interest rates indirectly, partly through deregulation and fiscal policy.
While Bessent said the economy may be slowing, he noted we have yet to see whether there will be economic “pain.” The main goal, he suggested, is to transition the economy off a reliance on public spending.
“Employment should be from private companies, not from [the] government,” he said. “I’m confident—if we have the right policies—it’ll be a very smooth transition.”
