The US looks set for simultaneous wars in three areas: deficits, currency and energy. That’s incoming US Treasury secretary Scott Bessent’s “three arrows” strategy – cutting the US fiscal deficit to 3 per cent of gross domestic product, growing the US economy at 3 per cent a year and expanding US oil and gas production by 3 million barrels per day.
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These ambitious goals, deeply tied to each other, mean Bessent is looking to deliver what financial markets want: growth plus stability. This is a high-wire job to be executed as part of a rumbustious cabinet that is expected to go gangbusters to fulfil Trump 2.0 policies to “Make America great again”.
It is fascinating that the United States, Europe and China are all aiming for rejuvenation – and unlikely that all three can return to glory at the same time. The nightmare scenarios are an unintended protectionist depression and/or nuclear war.
National aspirations are never executed in isolation. What the US wants will spark a backlash. So far, the mainstream Western view is that the Chinese economy is in deep trouble, whereas the mainstream Chinese view is that the West is not in great shape either. Still, the US is the world’s largest economy and its aspirations must be part of everyone’s strategic calculations.
Let’s unpack Bessent’s three arrows. Having simple objectives allows the team to focus. But anyone familiar with bloated bureaucracies, fickle public opinion and infighting knows that a lot can prevent the arrows from hitting their targets.
Hedge fund manager Scott Bessent speaks on the economy in Asheville, North Carolina, on August 14. Photo: AP
On paper, the three arrows plan looks achievable. But the US fiscal deficit Trump will inherit from the Biden administration stands at 6.4 per cent of GDP, more than double Bessent’s 3 per cent target. The second target of 3 per cent GDP growth is not far off an expected 2.8 per cent for 2024 but the average growth rate since 2008 has been nearer 2 per cent per annum.
