Scott Bessent’s Fiscal Tightrope: Can He Balance a Budget or Is This Just “Bond Market Death Spiral” Theater?

Scott Bessent—master of sniffing out governments whose economic narratives are as sturdy as a house of cards in a hurricane. He’s built an entire career betting against economic fictions and pocketing billions in the process. Now, as Donald Trump’s pick for Treasury secretary, Bessent finds himself in an ironic twist: he’s stepping into the exact mess he used to bet against.

If confirmed, he’ll be staring down the mother of all deficits—6.4% of GDP and counting—and tasked with fixing it using tools that range from tax cuts and deregulation to, well, hope. The fiscal cliff he’s inheriting isn’t so much a “cliff” as it is a crater. Federal borrowing has skyrocketed to record levels, and the interest costs alone are ballooning like a credit card bill in Vegas. And yet, Wall Street cheered at the news of his nomination, snapping up Treasuries with the same optimism one reserves for a “50% Off Everything” sign in a department store window.

The question now is: Can Bessent navigate the fiscal circus, soothe bond markets, and ensure the US economy doesn’t tumble into what Trump’s incoming VP, JD Vance, ominously calls a “bond market death spiral”? Or is Bessent about to discover that running the US Treasury isn’t quite as fun as shorting the pound in 1992? Spoiler: It’s not.

Debt, Deficits, and Denial: Washington’s Favorite Pastimes

First, let’s state the obvious: Washington has been on a fiscal bender for years. “Fiscal responsibility” has been punted to the next Congress more times than we can count. Emergency Covid programs, soaring retirement and healthcare spending, and ballooning interest costs have all teamed up to create a $28 trillion debt monster—a figure that makes the old “million-dollar deficit” of the 1980s look positively quaint.

The outgoing Biden administration’s forecast for three straight years of deficits over 6% of GDP is unprecedented at a time of solid economic growth and employment. It’s like having a high-paying job and still being unable to afford rent because you blew your paycheck on rare Pokémon cards and artisanal avocado toast.

Brian Riedl, a senior fellow at the Manhattan Institute, summed it up nicely: “The deficit is now so big that it requires very drastic and unpopular reforms to bring it down—at a time when Congress is busy playing Santa Claus.” A brutally accurate take, considering no one in DC has the stomach to touch entitlements, defense spending, or the tax code.

Enter Scott Bessent: Wall Street’s Favorite New Hope

So, what does Bessent propose? His ambitious goal is to cut the deficit in half to 3% of GDP by 2028. How? By deploying a fiscal combo platter of tax cuts, deregulation, spending restraint, and cheap energy. Wall Street ate it up, and investors flocked to Treasuries as though Bessent himself promised to hand-deliver them golden tickets to Wonka’s chocolate factory.

But let’s get real. This isn’t some exchange-rate wager where you place a bet, sip champagne, and watch the markets implode. This is Washington. His tools—tax cuts and deregulation—are historically known for boosting short-term growth but often worsening deficits. And convincing Congress to “restrain spending” is like trying to tell kids on Halloween to pick just one candy.

And yet, Bessent knows the stakes. If anyone understands the importance of keeping markets calm, it’s him. After all, he was a key player in George Soros’ legendary $1 billion bet against the British pound in 1992, a moment that ended with the UK in tears and Soros in a much larger yacht. Two decades later, Bessent foresaw Shinzo Abe’s yen plunge in Japan, further cementing his reputation as a financial Nostradamus.

But now he’s the one in charge of credibility. And if he fails to balance Wall Street optimism with fiscal realities, markets can—and will—punish him mercilessly. Just ask the UK, where a government collapsed in 2022 after its unfunded tax cuts sparked a massive bond selloff. JD Vance was right to worry about a “bond market death spiral.” If the US faces a sudden spike in yields, Bessent could find himself a Wall Street villain rather than its hero.

The Math: Why “3% of GDP” Sounds Great… in Fantasyland

Let’s put this “3% deficit” dream under the harsh light of math. Reducing the deficit to 3% of GDP by 2028 means halving a shortfall that’s already at $1.83 trillion. For context, the US hasn’t seen deficits this big outside of wartime or a financial apocalypse.

Can it be done? Sure—if you’re willing to:

1. Raise taxes (nope, Republicans hate that).

2. Cut Social Security and Medicare (political suicide).

3. Slash defense spending (laughable).

   
   

Without addressing those three areas, experts like Jason Furman—Harvard professor and former Obama economic adviser—say the 3% target is “completely unfeasible.” Even under optimistic scenarios, deficits will still hover near 6% of GDP a decade from now.

And let’s not forget interest payments. The government spent $882 billion on net interest last year—more than the Defense Department. Interest alone now consumes 3.1% of GDP, the highest since 1996. And as older debt rolls over, the Treasury has to refinance it at higher rates. That’s like paying off an old 2% mortgage only to sign up for one at 5%.

Why Bond Markets Matter: One Panic Away From Chaos

Bessent is acutely aware of "rollover risk”—the nightmare scenario where bond investors lose confidence, refuse to buy Treasuries, and force yields into the stratosphere. It’s a bit like a bank run but on a global scale.

His solution? Sell more long-term bonds to lock in lower rates. Sounds smart, but Treasury veterans point out it’s easier said than done. Longer-term debt issuance is tricky to ramp up without rattling markets, and any major shift would need to be gradual.

Meanwhile, the Fed is unlikely to ride to the rescue with ultra-low rates. While they’re expected to ease further in 2025, few economists think we’re going back to the post-Covid era of 1% borrowing costs. The days of cheap debt are over, and Bessent will be tasked with balancing the books without that lifeline.

A Fiscal Circus Under the Big Top of Trump

And let’s not forget the wild card in all this: Trump himself. Trump campaigned on extending his 2017 tax cuts, which will otherwise expire in 2025. Those cuts slashed federal revenues to 16.3% of GDP (from 17.5%) and ballooned deficits even during economic expansion. If those cuts are extended, deficits will worsen unless spending gets slashed—which, again, no one in Washington wants to do.

Add Trump’s unpredictability to the mix, and Bessent’s job starts to look like juggling chainsaws while riding a unicycle… on a tightrope… over a pit of alligators.

The Bottom Line: Will Bessent Deliver, or Is This Just Theater?

To his credit, Bessent isn’t blind to the problem. He’s called the deficit a “national defense issue,” warning that runaway borrowing could cripple the US in a crisis. But achieving his 3% target will require bipartisan cooperation, tax compromises, and a willingness to tackle politically sensitive programs—all of which are about as likely as Congress spontaneously breaking into a round of Kumbaya.

Optimists, like Stephen Jen of Eurizon SLJ Capital, believe Bessent’s team—including Musk and Vivek Ramaswamy—will pull off spending cuts, reduce inflation, and keep the bond market happy. But pessimists (also known as “realists”) see too many roadblocks, from Congress’s dysfunction to rising interest costs.

The stakes are enormous. If Bessent fails, yields could spike, markets could panic, and the deficit could spiral even further. If he succeeds? Well, someone owes him a very large trophy—and possibly another yacht.