America's national debt surged past the $40 trillion mark for the first time this week, yet Treasury Secretary Scott Bessent is urging the public and markets not to overreact to the figure. "There's nothing magical about $40 trillion. We can grow our way out of this," Bessent said during a television interview on Thursday. This marks his most explicit attempt yet this year to reframe a debt milestone that has troubled economists and fueled a selloff in long-dated Treasuries, all while he maintains a steady tone to soothe bond market anxiety.
According to Treasury Department data, the total national debt crossed $40 trillion just five months after surpassing $39 trillion in March. Bessent's comments came a day after the Treasury announced it would at least double the size of its long-term bond buyback operations, raising the per-auction cap from $2 billion to at least $4 billion in an effort to boost liquidity. In his view, the bond market has been thin and pricing has been distorted. The adjustment takes effect on September 9 and runs through November 4, covering both the 10-20 year and 20-30 year maturity sectors, which have experienced a "buyer's strike" since late June.
"We think there are underlying factors the market isn't focusing on, and we're going to be making a market in these bonds," Bessent said Thursday. "And I should note, it's possible for individual buybacks to exceed $4 billion."
The fundamental logic
Bessent's core argument is that the U.S. fiscal deficit is not as large as it appears on paper, and that the money the government is said to have "lost" hasn't actually vanished. He stated that the U.S. achieved fiscal consolidation in the 2025 calendar year, with the deficit standing at roughly 5.7% of gross domestic product (GDP). He attributed part of the elevated book deficit to one-time tariff refunds that will not recur. He also projected that tariff revenue in 2026 will be roughly on par with 2025, as U.S. Trade Representative Jamieson Greer reimposes tariffs through the Section 301 process.
Another major drag on revenue, he said, comes from the cost of allowing companies to immediately expense new factories, equipment, and agricultural facilities. Bessent does not view this outlay as government spending. "This is really an investment in the future, we're expanding the tax base," he said. "That's what measures a nation's wealth — the ability to increase after-tax returns on capital." He used a physical analogy to illustrate the strategy: "Think of it like pulling back a slingshot. As these factories come online, a lot of that potential energy is going to turn into kinetic energy this year and next."
When pressed directly on whether the administration believes the worst of the fiscal deficit is behind it, Bessent did not hedge. "I think there's a very good chance we have gotten through the worst of it," he said. He pointed to upcoming joint efforts with Office of Management and Budget Director Russell Vought, as well as a separate crackdown by a special anti-fraud task force led by Vice President Vance, which he claimed could "save hundreds of billions of dollars." He also revealed that the White House will "very likely" release a broader fiscal consolidation announcement this weekend or early next week, covering both spending cuts and revenue-raising measures.
The interviewer pressed Bessent on whether the buyback initiative was more about optics than substance, noting that Treasuries rallied on Wednesday — with the 30-year yield falling as much as 9 basis points after the announcement — but that some of those gains had faded by Thursday morning. Bessent did not rule out further escalation. "We have a rich toolkit, and we'll see how it goes," he said, while insisting the operations were not a response to any specific yield level. "It's not about whether the market is cooperating. It's: we look at market conditions, and we analyze accordingly."
Some have argued that aggressive bond buybacks would constrain Fed Chair Warsh's room for maneuver. Warsh has signaled support for shrinking the central bank's balance sheet or raising rates if inflation remains elevated. Bessent dismissed that view. "If there's any adjustment to balance sheet policy, Treasury and the Fed will coordinate," he said, adding that the buyback decisions have "nothing to do" with the interest rate outlook.
Inflation, employment, and the dollar
Bessent acknowledged that recent headline inflation has been pushed higher by the ongoing conflict with Iran and Brent crude trading near $94 a barrel, but argued this masks a fundamentally improving picture. He cited slowing wage growth in the services sector, income gains for the bottom 25% of earners, and what he called "the largest drop in drug prices in history." "Core inflation has come down," he said. "We're not seeing second-order effects spilling into core inflation."
On the labor market, Bessent described the latest weak jobs report as "noisy" and attributed the decline in the number of jobs the economy needs to create to stricter immigration enforcement. He noted that manufacturing and construction employment have hit 15-year highs. He also brushed off the recent softness in the dollar. "The U.S. is a large services economy, and we're not going to be driven by the trade-weighted dollar index," Bessent said. He described the greenback as "very, very stable" against the currencies of Canada and Mexico, the two major trading partners, and insisted the administration maintains a "strong dollar policy."
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