U.S. Treasury Secretary Scott Bessent said on Friday that the U.S. economy may slow as it transitions away from public spending towards more private spending, calling it a "detox period" needed to reach a more sustainable equilibrium.
"Look, there's going to be a natural adjustment as we move away from public spending to private spending," Bessent said on CNBC. "The market and the economy have just become hooked, and we've become addicted to this government spending, and there's going to be a detox period."
Bessent said the transition to a private-sector-driven economy may not have to bring a lot of economic pain, because the Trump administration's deregulation will be aimed at unleashing private-sector growth.
"We are going to have safe and sound regulation to get our banking system going again," Bessent said. "So the banks should be generating loans to private companies. Employment should be from private companies, not from government, and I'm confident, if we have the right policies, it'll be a very smooth transition."
Bessent's comments came before U.S. jobs data showed a slight pickup in February payrolls, but the unemployment rate edging higher to 4.1% from 4.0% in January.
Bessent said he thought that some level of tariffs was going to be needed permanently given the high level of economic imbalances around the world and the need for more secure supply chains.
But due to "crazy" Congressional Budget Office scoring rules, it was unlikely that tariff revenue will be counted as revenue that can offset the cost of extending Trump's 2017 tax cuts for individuals that expire at year-end, Bessent said.
Budget forecasters estimate that extending the cuts would increase U.S. deficits by more than $4 trillion over 10 years.
President Donald Trump told Fox Business Network in an interview that tariffs could go up over time.
Asked whether businesses could get clarity about his tariff plan, Trump said: "Well, I think so. But, you know, the terms could go up as time goes by, and they may go up and, you know, I don't know if it's predictability."
Bessent reaffirmed that there has been no change in the Treasury's "strong dollar policy" but the Trump administration was against bilateral currency manipulation.
Trump is "committed to the policies that will lead to a strong dollar," Bessent said. "If we bring back more manufacturing, if we have cheap energy, good tax policy, deregulate, we will end up with a strong dollar. But what is unacceptable is in a bilateral relationship, other countries trying to weaken their currency."
