Written by David Lowder

WASHINGTON (Reuters) – President-elect Donald Trump’s pick for Treasury Secretary, Scott Besent, said on Thursday that the dollar should remain the world’s reserve currency, that the Federal Reserve should remain independent and that he was prepared to impose tougher sanctions on the oil sector. Russian. .

While testifying at a Senate Finance Committee hearing, Picent stressed the urgent need to extend Trump’s 2017 individual tax cuts, saying that allowing them to expire at the end of this year would unleash a $4 trillion tax increase that could crush the US economy.

“If we do not renew and extend, we will face an economic disaster,” Besant said. “We will see a massive increase in taxes on the middle class.”

Bessent, a hedge fund manager and founder of Key Square Capital Management, expressed support for Trump’s plans to impose heavy tariffs, saying they would fight unfair trade practices, raise revenues and increase US negotiating leverage, including on non-trade issues.

He said in prepared remarks that pro-growth tax, investment, trade and energy policies would lead to a “new economic golden age” of prosperity.

Russian oil sanctions

Besant said US sanctions on the Russian oil sector were too weak, in part because the Biden administration was very concerned about increasing prices at the same time it was restricting US oil production. He added that increasing US oil production would allow for more stringent sanctions to be imposed on major Russian oil companies.

“I think if any official of the Russian Federation is watching this confirmation hearing, they should know that if I am confirmed, and if President Trump requests it as part of his strategy to end the war in Ukraine, I will participate 100%,” he added. “With sanctions — especially on major Russian oil companies — being lifted to levels that would bring the Russian Federation to the table,” Besant said.

He also had harsh words for China, calling it “the most dysfunctional and imbalanced economy in the history of the world,” an economy that was trying to export its way out of a “severe recession” and the United States could not let China do so. Flooding American or international markets with cheap goods.

No drama

If confirmed by the Senate, Besent would be the first openly gay Treasury secretary and Cabinet member in a Republican administration. Behind him sat the South Carolina native’s husband, former New York City Attorney John Freeman, and their two children, Cole and Caroline.

In a session marked by a few tense remarks, Bescent calmly answered questions ranging from child tax credits to the effects of tariffs on farmers and veered away from answers consistent with previous Republican Treasury nominees, but without conflicting with Trump’s policy plans.

He said U.S. spending on President Joe Biden’s clean energy tax credit was “pretty much out of control” and that the high deficits in recent years were due to a “spending problem.” Asked whether there was a need to restore the 100% tax credit for business research and development, he said his “inclination” would be to support that.

Democrats criticized Bescent for exploiting a tax loophole, the legality of which was questioned by the Internal Revenue Service, to reduce Medicare taxes paid by his hedge fund by $910,000 over three years.

“This is exactly the kind of abusive scheme that makes Americans disgusted with our tax system,” said Senator Ron Wyden, the committee’s top Democrat.

Picent said he will set aside money to pay any taxes owed once the case is decided. He has pledged to close Key Square to avoid a conflict of interest if his nomination is confirmed.

Independence of the Federal Reserve

Markets were expected to scrutinize Besent’s comments about keeping the Fed independent for clues about whether Trump will try to exert control over the US central bank in light of the president-elect’s repeated complaints about the Fed’s interest rate decisions.

But Besant stood strongly on the side of the independence of the Fed’s monetary policy, adding that Trump would still make his views known.

“I think that in terms of monetary policy decisions, the FOMC should be independent,” he said, referring to the Federal Reserve’s interest rate-setting committee, the FOMC.

Although some economists said Trump’s plans to impose tariffs, cut taxes and limit immigration would be inflationary, Bescent disagreed, saying Trump’s plans, including increasing energy production, would bring inflation down to the Fed’s 2% target. With increased wages.

Despite Trump’s long-standing complaints about the impact of a strong dollar on US exports, Besant said: “We must decisively ensure that the dollar remains the world’s reserve currency.”

Besant also rejected the idea of ​​creating a central bank digital currency for the Federal Reserve, saying the widespread use and security of the dollar makes it unnecessary. He said he was open to the idea of ​​creating a US sovereign wealth fund, but said the United States needed to get deficit growth under control in the short term first.

High debt, less capacity

Pisant pledged that there would be no default on US Treasury debt under his watch. Asked whether Congress should abandon the federal debt ceiling, Picent said that if Trump requests it, he will work with Congress to make it happen.

The high level of debt means there is less ability to borrow heavily to combat the crisis, Besant said, citing examples of the Great Depression of the 1930s, World War II, and the recent Covid-19 pandemic.

“Treasury — along with the entire government and Congress — used its borrowing power to save the Union, to save the world, and to save the American people,” Besant said. “What we have now, it would be difficult for us to do the same.”