Scott Bessent’s “3-3-3” plan to stimulate growth, reduce the deficit and expand oil production will soon face economic realities.

When Prime Minister Shinzo Abe set out to rejuvenate Japan’s economy more than a decade ago, he laid out a strategy known as the “Three Arrows,” which aimed to banish deflation by easing monetary policy, increasing government spending and restructuring the economy so that it was poised for growth.

President-elect Donald J. Trump could soon brandish three arrows of his own. Mr. Trump’s Treasury secretary pick, Scott Bessent, has mapped out a three-pronged approach to jump-starting a U.S. economy that has been saddled with inflation and sluggish output. The concept, which he billed during the campaign as his 3-3-3 plan, entails increasing growth to 3 percent, cutting the budget deficit to 3 percent of gross domestic product and raising U.S. energy production by three million barrels of oil per day, or the equivalent in other fuels.

A longtime hedge fund investor, Mr. Bessent has been a student of “Abenomics” since his days as the top money manager for the billionaire philanthropist George Soros. In that role, he met regularly with advisers to Mr. Abe and traveled from New York City to Tokyo on a monthly basis. He also famously bet against the yen.

“I became convinced that Abe and his circle of advisers would commit to directing all of the resources of the prime minister’s office to this multipronged and daunting task,” Mr. Bessent wrote in a 2022 essay in The International Economy magazine.

While Mr. Trump has made broad economic promises on the campaign trail this year to supercharge the economy, slash the debt and unleash energy production, Mr. Bessent’s benchmarks offer a more specific scorecard against which Mr. Trump’s economic performance can be measured at the end of his term.

But reaching those marks will not be easy and will depend on a variety of factors, including how deeply Republicans decide to cut taxes, how high Mr. Trump ratchets up tariffs and how much oil global markets demand.

“I think having a clear set of goals is a good thing for policymakers to have,” said Jason Furman, an economics professor at the Harvard Kennedy School and a former chair of the Council of Economic Advisers under President Barack Obama. “You just need them to be realistic. There’s a distinction between what is possible and what you should count on.”

The grail of economic growth

Economists warned during the presidential campaign that Mr. Trump’s policies could add up to $15 trillion to the national debt over a decade while stunting economic growth and reigniting inflation with tariffs.

Mr. Trump has dismissed those forecasts, predicting that his policies will bring a new “golden age” for America. In 2017, during his first term, Mr. Trump once suggested that economic growth could hit 6 percent as a result of his plans to cut taxes and roll back regulations. It ultimately topped out at 3 percent, which is where Mr. Bessent, who declined to be interviewed ahead of the confirmation process, would like to see it return.

The International Monetary Fund projects that U.S. output will slow to 2.2 percent in 2025 from 2.8 percent this year. There are, however, reasons to suggest that economic tailwinds could put the U.S. economy on a path toward faster growth under Mr. Trump.

However, he has threatened to reverse parts of Mr. Biden’s agenda, including the Inflation Reduction Act, and has criticized federal subsidies for the chips industry. If Mr. Trump succeeds in eliminating that spending, it could actually slow growth.

That 3 percent goal could also face headwinds if Mr. Trump proceeds with stiff tariffs on other countries. Such a move would undoubtedly prompt trading partners to retaliate with tariffs on American products, weighing on U.S. exports.

Mr. Furman also noted that Mr. Trump’s immigration policies, which include mass deportations of undocumented immigrants, could weigh on the economy by shrinking the labor force.

“Immigration is by far the biggest lever that affects economic growth, and that will be moving in the wrong direction,” he said.

Reversing a deficit disorder

Republicans are planning to extend tax cuts that could cost more than $4 trillion over a decade and to weaken the tax collection capabilities of the Internal Revenue Service by cutting its budget. Both of those moves, if they happen, would make it more challenging to reduce deficits.

In the fiscal year 2024, the federal budget deficit was $1.8 trillion, or 6.4 percent of gross domestic product. Mr. Bessent wants to get that down to 3 percent by 2028.

At an event this year hosted by the Manhattan Institute, a right-leaning think tank, Mr. Bessent said that covering the cost of extending the expiring tax cuts that Republicans had passed in 2017 should be done through other budget cuts, such as provisions of the Inflation Reduction Act. He also suggested freezing nondefense “discretionary” spending and shifting some Medicaid spending to the states.

Mr. Trump is creating a Department of Government Efficiency, led by Elon Musk and Vivek Ramaswamy, that will aim to reduce federal waste and find ways to cut spending. However, it remains unclear how their proposals will come into force.

The rising costs of Social Security and Medicare are the biggest drivers of the national debt, and Mr. Trump has said that he will not approve cuts to social safety net programs. At the Manhattan Institute event, Mr. Bessent acknowledged that addressing those programs will be crucial to the nation’s long-term fiscal health.

“These entitlements are massive — I think the next four years isn’t the time to deal with them,” Mr. Bessent said, explaining that confronting the cost of entitlements needs to be a gradual process. “The next step is for a future administration to have the confidence to deal with the entitlements.”

‘Drill, baby, drill’

Mr. Trump has made energy production a centerpiece of his economic agenda. He argues that by unshackling America’s oil and gas industries, energy costs will fall and inflation will ease further.

Mr. Bessent has offered a more specific target, suggesting that the United States should strive to increase domestic oil production, which is expected to average around 13.2 million barrels per day this year, by an additional three million barrels per day. It is not clear if he is counting gas production in that calculation.

If he is, the United States could meet that target by the end of Mr. Trump’s term, if it were to continue on its current growth trajectory. Increasing domestic production of oil alone by three million barrels a day would be much more difficult.

The oil and gas industry wants the Trump administration to expand federal leases for drilling, make it easier to build pipelines and to end a pause that the Biden administration put in place on new liquefied natural gas exports.

An expansion of production that sends energy prices tumbling sharply could weigh on profits for oil and gas companies, and they might resist such investments if there is insufficient global demand.

Already, the International Energy Agency, a multilateral organization based in Paris, is forecasting that global production will outpace demand by more than one million barrels a day next year.

Concerns about a looming glut have weighed on the price of oil, which has been hovering around $70 a barrel in the United States. Companies here generally need prices above $60 a barrel to profitably drill new wells, according to the Federal Reserve Bank of Dallas.

Many producers are also more cautious now about pursuing aggressive growth than they were during Mr. Trump’s first administration because that strategy was incredibly expensive and investors grew tired of losing money in the shale patch.

“It’s a real dilemma because some of the energy companies are not too excited about it, because if you drill more, it’s going to bring down the price,” said Stephen Moore, a Heritage Foundation economist who has advised Mr. Trump. In natural gas, the ability to turbocharge domestic production will depend in large part on whether companies are able to build more pipelines to bring the fuel from the field to places where there is demand for it.

It remains to be seen how seriously Mr. Bessent’s 3-3-3 targets will be taken in Washington and if they have a chance at success. In his 2022 essay, Mr. Bessent recalled his former boss, Mr. Soros, asking him in 2012 if he thought “Abenomics” would actually work.

“I’m not sure whether it will work,” Mr. Bessent remembered saying at the time. “But it will be the market ride of a lifetime.”

by Alan Rappeport & Rebecca F. Elliott

Credits: The New York Times