Bessent: Feds High Rates Complicate Debt Plan Fix

Treasury Secretary Scott Bessent revealed that President Donald Trump’s administration is preparing a new federal debt reduction plan to be unveiled shortly after the midterm elections, acknowledging that high interest rates, the war with Iran and tariff refunds are complicating efforts to rein in Washington’s massive deficits.

Bessent offered his take on the growing national debt during an interview with Greta Van Susteren on Thursday at Newsmax’s NPolicy Summit at the Willard Hotel in Washington, D.C.

Bessent told Van Susteren that he is working directly with President Donald Trump and White House budget director Russell Vought on a strategy to bring federal spending and borrowing under control without pushing the U.S. economy into recession.

“Russ Vought, the president and I are working on a fiscal consolidation plan,” Bessent said. “I think we’re going to unveil that right after the midterm.”

The disclosure came after Van Susteren pressed the Treasury secretary about the nation’s approximately $41 trillion debt and the staggering cost of servicing it, which she estimated at $1.2 trillion to $1.3 trillion annually.

“At what point is it going to become a crisis, and how does this impact the average American family?” Van Susteren asked, specifically citing farmers, teachers and working Americans.

Bessent acknowledged the challenges but argued that the administration has already made progress in reducing the deficit.

He said the federal deficit reached 6.7% of gross domestic product in 2024 under President Joe Biden, a level Bessent described as unusually high outside a war or recession.

“We brought that down to about 5.7,” Bessent said.

However, he acknowledged that the deficit has increased this year, pointing to tariff refunds, elevated borrowing costs and military operations involving Iran.

“It is up this year because of tariff refunds,” Bessent said.

“Look, we’re in a war and interest rates are high, but it would be flat without the tariff refunds. So in that kind of environment, I think flat’s pretty good.”

Higher interest rates present a significant obstacle to deficit reduction because the government must devote more revenue to servicing existing debt and refinancing maturing Treasury securities.

In September 2026, the Fed increased its benchmark rate by a quarter percentage point to 3.75%–4%, citing persistent inflation, including higher energy prices associated with the Iran conflict.

Trump sharply criticized the decision, arguing that elevated borrowing costs are unnecessarily burdening the economy and increasing the federal government’s debt-servicing expenses.

“Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR,” Trump wrote on Truth Social.

“LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!” he wrote.

Trump has continued supporting his appointed Fed chairman, Kevin Warsh, while criticizing other central bank policymakers.

Bessent told Van Susteren the Fed should recognize that inflation is due largely to a supply issue related to oil supplies.

He suggested that the administration’s approach in the coming two years will combine spending restraint with policies designed to accelerate economic growth.

He recounted an early conversation with Trump at Mar-a-Lago in which the future president raised the debt problem before returning to the White House.

“Scott, how are we going to get the debt and deficits down without causing a recession?” Bessent recalled Trump asking.

“And I think a lot of it’s going to have to be through pro-growth policies,” Bessent said.

The Treasury secretary criticized the Congressional Budget Office’s growth assumptions, saying its projections do not adequately reflect the potential economic impact of tax policy.

He argued that stronger growth could improve the government’s fiscal position by increasing revenues relative to the size of the economy.

“I think we probably grew more than 3% this quarter. I think we can keep doing that,” Bessent said.

“And if we grow at 3%, that curve will start bending.”

Bessent did not disclose specific spending cuts, revenue measures or deficit targets for the forthcoming plan.

His comments nevertheless signal that the administration intends to make debt reduction a major policy initiative following the midterms, while betting that sustained economic expansion can help Washington confront its mounting fiscal obligations without triggering a downturn.

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