Treasury Secretary Bessent Speaks at Economic Club of Minnesota—Key Takeaways

Treasury Secretary Scott Bessent appeared at the Economic Club of Minnesota on Jan. 8 to highlight President Donald Trump’s economic agenda and expectations for the year ahead from the One Big Beautiful Bill Act.

While the previous administration grappled with a “toxic mix” of immigration, interest rates, and inflation, the Trump-led White House is championing “investment, innovation, and income,” Bessent said.

Bessent’s remarks come as Minnesota has been at the center of the national spotlight in recent weeks, led by rampant welfare fraud and a fatal ICE encounter.

Here are the key takeaways from his appearance at an Economic Club of Minnesota event.

Tackling Welfare Fraud

Bessent believes recovering lost dollars to welfare fraud could help pay for the president’s recently proposed $1.5 trillion defense budget.

In a Jan. 7 Truth Social post, Trump said next year’s defense budget should be $1.5 trillion, representing a $500 billion increase from current levels.

Asked how the president could pay for it, Bessent said that recovering money from fraud could help cover the cost.

“Minnesota, unfortunately, is ground zero for what may be one of the most egregious welfare scams in our nation’s history to date,” he said. “Under Governor Tim Walz, billions of dollars intended for families in need, housing for disabled seniors, and services for children were diverted to benefit fraudsters.”

He cited a Government Accountability Office report, which estimated annual fraud totaled as much as $600 billion.

Bessent, who is also the acting IRS commissioner, said the White House considers aggressive fraud enforcement a crucial part of its broader efforts to curb government waste—funds that could be used to pay for national security initiatives without raising taxes.

In addition to looking into Minnesota, Bessent signaled that U.S. officials could examine similar issues in other states.

“I am here this week to signal the U.S. Treasury’s unwavering commitment to recovering stolen funds, prosecuting fraudulent criminals, preventing scandals like this from ever happening again, and investigating similar schemes state by state,” he said.

Fed Policy, Powell Successor

Weeks before the Federal Reserve holds its first two-day Federal Open Market Committee meeting of the year, Bessent acknowledged that Fed policy remains above neutral territory.

The neutral rate is when policy is neither restrictive nor stimulative.

Since arriving at the Oval Office in January, the administration has been urging the central bank to lower interest rates to further bolster economic conditions.

“It is the only ingredient missing for even stronger economic growth, which is why the Fed should not delay,” Bessent said in his prepared remarks. “I believe the Fed needs to have merely an open mind. The open-mind maestro, former Fed Chairman Alan Greenspan, resisted premature rate hikes during the technology boom of the 1990s—and history proved him right.”

The Treasury secretary thinks interest rates should be lower.

“Most models would show 2.5 [percent] to 3.20 [percent],” he said in a question-and-answer session.

The administration, Bessent notes, is still searching for a successor to Fed Chair Jerome Powell, whose term ends in May.

Trump has pointed to a handful of candidates to be the next head of the U.S. central bank, including National Economic Council Director Kevin Hassett, Fed Gov. Christopher Waller, and former Fed Gov. Kevin Warsh.

Bessent acknowledged that the White House has not yet interviewed BlackRock Chief Investment Officer Rick Rieder.

The president could make his decision sometime this month, he said.

Predictive markets suggest Hassett and Warsh are tied at 38 percent. Waller stands at 14 percent odds, while Rieder has a 4 percent chance of being named the next Fed chair.

Investors overwhelmingly expect the Fed to leave interest rates unchanged at the January policy meeting, according to the CME FedWatch Tool.

Supreme Court to Rule on Tariff

The Supreme Court is soon expected to rule on whether Trump can use emergency powers to impose his tariff agenda under the International Emergency Economic Powers Act.

Justices have expressed skepticism that the executive branch can employ this authority without congressional approval.

Bessent noted that he is not concerned about lost tariff revenue, but rather about the president losing flexibility to impose higher import duties.

“What is not in doubt is our ability to continue collecting tariffs at roughly the same level in terms of overall revenue,” Bessent said. “What is in doubt—and it’s a real change for the American people—is the president losing flexibility to use tariffs, both for national security, for negotiating leverage.”

Tariffs have helped the United States collect nearly $99 billion so far this fiscal year, which started Oct. 1, 2025, according to the Daily Treasury Statement released Jan. 7.

The average effective tariff rate is close to 17 percent, according to The Yale Budget Lab.

Smaller Deficit Ahead

The federal government could have a smaller budget deficit this calendar year.

Bessent projected that the budget shortfall could be between $300 billion and $500 billion lower—equivalent to 1 percent of the gross domestic product (GDP).

“We have constrained spending, and the economy has grown roughly 6 percent nominal,” he said.

Echoing his predecessor, Janet Yellen, Bessent believes the key metric to monitor is the deficit-to-GDP ratio, which he forecasts will fall to around 5 percent. When Trump took office, it was approximately 6.4 percent.

Last year, Washington registered a $1.8 trillion budget deficit.

A group of Republican lawmakers introduced a resolution on Jan. 8 to set a 3 percent deficit target to stabilize the national debt. This would mirror the Treasury secretary’s goal of reducing the federal deficit to 3 percent of GDP.

The action was lauded by the independent policy organization Committee for a Responsible Federal Budget.

“This resolution is a first step toward fixing our fiscal trajectory and will help build bipartisan consensus in favor of a sustainable budget framework,” Maya MacGuineas, the group’s president, said in a statement.