In a recent discussion, Scott Bessent, an advisor to President Donald Trump, emphasized that both he and the President are “laser-focused on paying down the debt.” This promise arrives as the nation faces an increasingly challenging economic environment amid confusing housing start and inflation numbers.
Housing starts had been quite weak going into July. Contrary to expectations, the new numbers from the US Census Bureau show a major comeback. New residential home construction jumped by 5.2% from June, to a seasonally annualized rate of 1.428 million. This substantial bump comes against a backdrop of warnings from Bessent himself about the long-term consequences of limited home construction.
“If we keep constraining home building, what kind of inflation does that create one or two years out?” – Scott Bessent
The economic environment is fundamentally different now than just a few months ago. Most significantly with respect to interest rates. As the July jobs report indicated, we are still experiencing anemic employment growth. Consequently, the chances of a rate cut next September have markedly risen. In many ways, that optimism took a whack. Consumer inflation data confirmed that price increases for families and firms are accelerating again. The odds of a rate cut dropped from nearly 100% to approximately 80% after the latest inflation figures were released.
These stock market gains have overwhelmingly driven the recent increase in inflation upwards. These increases have had an outsize impact on the PPI’s inflation measure, too. Previously, economists had expected a 0.3% rise in this index, an indication that the economic indicators are worth monitoring as we balance close watch and hope.
Amid this extremely challenging economic backdrop, Bessent emphasized that the federal government has an important role to play in delivering much-needed relief to families. A family of four would currently benefit by an estimated $2,400 from federal measures meant to alleviate burdens on tight budgets. A few lawmakers want to leverage the tariff revenue to pay for the rebate checks. Their plan calls for a minimum of $600 per adult and dependent child.
As of mid-July, the U.S. has raked in more than $100 billion in tariff revenue. This jump comes on the heels of a full rollout of most of Trump’s tariffs worldwide. In May, Bessent estimated that this revenue could climb as high as $300 billion by the end of the year.
“I’d been saying that tariff revenue could be $300 billion this year” – Scott Bessent
Bessent sees a strong new economic policy in using tariff revenue to invest in places most harmed by globalization. His goal is not just to reduce this deficit-to-GDP ratio but to address the national debt itself. He argues that these investments will pay dividends for the American public in the long run.