The Bessent Pipe Dream
What would Frédéric Bastiat do?
Is Scott Bessent a good or a bad economist?
The new Treasury Secretary is all the rage these days, with a diverse set of takes on him and what he can do for the US economy. I won’t introduce Scott again as I have already done it here and more recently here (in my two Trump trade pieces).
I briefly explained to Elon Musk why I thought Bessent was getting the nomination and why he was the best one to get it too, tweet.
In the tweet I explained that Scott “gets it” — in terms of the damage Bidenomics has caused and where the US is in terms of its life cycle: That is to say, massive uncontrollable deficits, unsustainable sovereign debt etc.
But is that enough?
Enter Frédéric Bastiat (1801 - 1850)
Bastiat was a free-market economist whose views and teachings influenced Mises, F.A. Hayek and the school of Austrian economics.
In early 2022 I wrote a thread reviewing his essay which talks about unintended consequences and higher-order effects in economics…
The Bessent Plan
The word is that Bessent was influenced by Shinzo Abe’s Three Arrows in designing his plan to solving the US’s problems.
He has advised Trump to pursue a policy he calls 3-3-3, inspired by former Japanese Prime Minister Shinzo Abe, who revitalized the Japanese economy in the 2010s with his “three-arrow” economic policy. Bessent’s “three arrows include cutting the budget deficit to 3% of gross domestic product by 2028, spurring GDP growth of 3% through deregulation and producing an additional 3 million barrels of oil or its equivalent a day.
—> I don’t see the analogy.
First, Abe’s Three Arrows (Abenomics) did not revitalise the Japanese economy — one could argue it did the opposite. Today Japan finds itself worse off both fiscally and economically.
(This may be a controversial take, but it is my take. Besides, operational success is what matters in the end and not the technicalities of theory or history.)
Second, Bessent’s 3-3-3 doesn’t compare to Abenomics in terms of policy.
For more context on Abenomics, read my presentation from 2015 on the matter here. 🦉🇯🇵
Ok, let’s review:
Abenomics
Fiscal Stimulus
Quantitative Easing
Structural Reforms
Bessent’s 3-3-3
Cutting the budget deficit to 3% of GDP by 2028
Boosting GDP growth to 3%
Increasing energy production in the US by 3mln BOE per day
Philo’s Take 🇯🇵 - 🇺🇸
Abenomics was something that could be executed, in principle.
You just deficit more, get the BOJ to do more of what it has always been doing (i.e. degenerate central banking) and lastly spitball “structural reforms” like everyone else.
In the conclusion of my presentation from 2015 (linked above) I clearly stated what I expected would be the outcome... 💅 it once more.
What about Bessent’s triple 3? Can it be done? What would be the outcome?
Let’s dive in…