Treasury Secretary Scott Bessent said on Sunday that the 43-day government shutdown had an $11 billion permanent hit on the US economy. But he was positive about growth next year. He pointed to lower interest rates and tax cuts as reasons. Bessent said on NBC’s Meet the Press program that parts of the US economy sensitive to interest rates had been in recession. Housing is one of these parts. But he did not see the entire economy at risk of shrinking.
Services Economy Blamed for Inflation, Not Tariffs
He blamed the services economy for inflation, not US President Donald Trump’s wide ranging tariffs. This repeats what the Trump administration has said for a long time. He added that he expected lower energy prices to push down prices more broadly. Trump has focused hard on prices in recent weeks. This came after Democratic wins in state and local elections. His approval ratings have also dropped. They are now at 38 percent. This is the lowest since his return to power. A recent Reuters poll showed this.
Bessent sounded optimistic despite recent data showing a slowdown in US factory activity. Higher prices from tariffs on imports held back demand. The University of Michigan consumer survey came out on Friday. That also showed people upset about higher prices. I am very, very positive on 2026, said Bessent. We have set the table for a very strong, non-inflationary growth economy.
Food Tariff Cuts Result of Trade Deals
Last week’s moves to cut tariffs on food imports such as bananas and coffee were the result of trade deals, which had been talked about for months, according to Bessent. Inflation is a mix of many things and we look at everything, so we’re trying to push down the things we can control, he added. Trump on Wednesday signed a law ending the longest government shutdown in U.S. history, extending funding through January 30. That sets the stage for another possible fight between Democrats and Trump’s Republicans next year.
Bessent said Republicans should vote immediately to end the filibuster if Democrats closed the government again. Trump has also requested such a move. But Bessent dodged a question on whether there are enough votes to do that. Changes that cap taxes on overtime would improve working Americans’ real income. Cutting some workers’ taxes on tips and Social Security would help, as would making auto loans tax deductible. Those would offset higher costs, Bessent said.
Big Tax Refunds Expected Early Next Year
Taxpayers would get huge federal tax refunds in the first quarter of 2026. This comes from the changes in tax rates, he added. The Trump administration also plans an announcement this week aimed at lowering healthcare costs, Bessent said. A senior White House official said something similar last week. But no details were given. A lot of trade deals would also help lift the economy, Bessent said. He predicted new plant openings across the country.
The 43-day shutdown was a new record in the United States. The ways in which it harmed the economy are so numerous that they cannot be counted. Initially, the federal workers did not receive their salaries for more than a month. Many of them had to get another job or take a loan. Services of the government were stopped or slowed, which, in turn, affected the companies that depend on them. The $11-billion permanent damage indicates that the money is gone forever; the economy will not be able to get it back.
However, Bessent and the rest of the Trump administration officials believe that the situation will improve. They refer to decreasing interest rates as a reason for that. When rates are lower, people can take loans at a cheaper rate. This allows them to buy houses and cars. Also, businesses get the same benefit. Besides that, tax cuts will be placing more money in people’s pockets. Lower energy prices mean that people spend less on gas and heating, which, in turn, leaves them with more money for other things.
Not everyone thinks it will be that great. Some economists are concerned about the tariffs. They make imported goods more costly for buyers. That raises prices for consumers. The slowdown in factories is another cause for concern. If the factories produce less, they may lay off workers. Consumer surveys reflect that people are irritated over prices. They do not feel as good about the economy as the government says they should.
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