Overview
Scott Bessent, President-elect Trump’s nominee for Treasury Secretary, is proposing a “3-3-3” economic plan designed to reduce the federal deficit, boost economic growth, and expand U.S. energy production. Modeled after Japan’s late Prime Minister Shinzo Abe's “three arrows” strategy, Bessent’s plan emphasizes fiscal discipline, deregulation, and energy independence.
Key Components of the 3-3-3 Plan
Deficit Reduction to 3% of GDP
Target: Reduce the federal deficit to 3% of GDP by 2028.
Approach: Bessent urges President Trump to publicly commit to this goal. Current deficits average 6-7%, making this a significant fiscal challenge.
Why It Matters: Lower deficits free up resources for future crises and stabilize the national debt trajectory.
3% Real Economic Growth
Mechanisms: Achieving growth through deregulation, tax reform, and policies that encourage private investment.
Tools: Extending key provisions of the 2017 Tax Cuts and Jobs Act with offsetting measures to mitigate revenue loss.
Inflation Control: Focus on slaying inflation to enhance investment confidence and stabilize household budgets.
Energy Production Boost
Goal: Increase U.S. energy production by the equivalent of 3 million barrels of oil per day.
Impact: Lower energy costs would reduce inflation expectations, benefiting households and the broader economy.
Strategic Importance: Expanded domestic production strengthens energy security and reduces dependence on foreign oil.
Inspiration from Japan’s “Three Arrows”
Bessent credits Shinzo Abe’s “three arrows” framework as the blueprint for his strategy. Abe’s economic policies combined monetary easing, fiscal stimulus, and structural reforms to tackle stagnation and deflation in Japan.
Fiscal Challenges and Solutions
Spending Restraints:
Bessent suggests freezing discretionary spending (except for defense) and finding savings in large initiatives like the Green New Deal, which he estimates could save $1 trillion over a decade.
He also advocates for empowering states to manage Medicaid without reducing benefits.
Entitlement Programs:
While acknowledging that Social Security and Medicare are the largest contributors to long-term deficits, Bessent proposes deferring entitlement reform to future administrations. Instead, he emphasizes starting with discretionary spending cuts.
Deficits and National Defense
Bessent warns that high deficits could limit the U.S. government's ability to respond to future crises, comparing the current situation to historic periods like the Civil War, the Great Depression, and World War II, when deficit spending was crucial.
Outlook and Strategy
Bessent describes his approach as a phased effort:
Phase 1: Address discretionary spending to stabilize deficits in the short term.
Phase 2: Lay the groundwork for future entitlement reform.
He believes these steps could create a self-reinforcing cycle of economic stability and growth, giving the U.S. room to address long-term fiscal challenges.
Bottom Line
Scott Bessent’s 3-3-3 plan presents a comprehensive strategy to tackle some of the U.S.’s most pressing economic issues. By targeting deficit reduction, growth, and energy production, the plan seeks to balance fiscal responsibility with pro-growth policies. However, its success depends on political will and the ability to implement challenging reforms.
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