Treasury Secretary Bessent on Interest Rates, the Budget, and Growth

Plus, new filings and a judge’s order in Kestenbaum case against Harvard

The Treasury secretary, Scott Bessent, did an interview recently with the “All-In Podcast” that was illuminating on several fronts.

First, he’s aiming for higher growth and hoping that will improve the federal budget picture: “Tax cuts and deregulation will change the growth trajectory... grow GDP. If trend line has been 1.8, if you can move the growth to three or above, then you really change their trajectory. And if you can keep expenses flat or do the unthinkable and cut expenses, then you can really...”

Second, he understands the linkage between interest rates and the federal budget: “We might actually pull Treasury bill yields down by 30 to 70 basis points. Every basis point is a billion dollars a year.”

As I wrote recently (“Maybe Trump Is Intentionally Creating a Mini-Recession,” March 13, 2025), “with interest rates where they are, the cost to the Treasury of simply rolling over existing debt is staggering. It doesn’t leave tax cutters much room to operate, even taking into account the dynamic growth effects of the tax cuts. A deficit or tax cut that looks affordable at three percent interest rates becomes more difficult, or impossible, at four and a half or five percent interest rates.”

The Manhattan Institute has a series of charts quantifying this:

From the Manhattan Institute’s Budget Chart Book.