Expectation vs reality: Assessing Bessent’s 3-3-3 plan

Heather Coulson Head of Portfolio Management and Implementation, Scottish Widows

Scott Bessent, US Treasury Secretary and former hedge fund manager, has touted a “3-3-3” plan – a bold economic strategy aimed at tackling three major areas of the US economy: increasing growth, shrinking the budget deficit and boosting energy production. The plan draws inspiration from the late Japanese Prime Minister Shinzo Abe’s “Three Arrows” approach, which sought to revive Japan’s economy through monetary easing, fiscal stimulus and structural reform.

This article assesses the feasibility of each target in light of current political, fiscal and economic conditions.

1. Increasing growth to 3%

Annualised GDP in the US shrank by 0.5% during the first quarter of 2025 – a sharp reversal from 2.4% growth in Q4 2024.¹ This marked the first quarterly contraction in three years, driven by pre-tariff import surges and fears over trade disruptions. Although a Q2 rebound is expected as imports normalise, broader headwinds such as increased inflationary pressure from tariffs, are likely to dampen growth.

To stimulate US GDP growth, Bessent has advocated for deregulation and tax cuts to encourage private sector investment, alongside lower energy prices.

The One Big Beautiful Bill was signed into law on 4th July 2025. It enshrines tax cuts from President Trump’s first term and introduces new cuts too – for individuals and businesses alike. Spending on health insurance and other social benefits, as well as green energy, have meanwhile been slashed. Despite these cuts, however, overall the bill is projected to add more than $3trn to government debt, while only increasing GDP by 0.5% over the same period.²

Meanwhile, Trump’s proposed mass deportations of unauthorised immigrants could further hinder growth.³ Immigrants play a vital role in sectors such as agriculture, food supply, and construction – areas already facing labour shortages. Deportations would exacerbate these shortages, leading to higher costs, inflation and slower economic expansion.⁴

In 2024, the US federal deficit stood at $1.8 trillion, or 6.4% of GDP.

2. Cutting the budget deficit to 3% of GDP

While growth remains a central pillar of the plan, fiscal discipline is equally critical. The second target in Bessent’s strategy targets a dramatic reduction in the federal budget deficit.

In 2024, the federal deficit stood at $1.8 trillion, or 6.4% of GDP.⁵ A reduction of this scale would require significant cuts to government spending. While the aforementioned One Big Beautiful Bill reduces funding for social and environmental programmes, paradoxically it is estimated to add over $3trn to the deficit over the next decade.

President Trump’s creation of the Department of Government Efficiency (DOGE) aimed to eliminate wasteful spending and improve transparency. But the department has faced criticism for aggressive cost-cutting, agency shutdowns, mass layoffs, and legal challenges over data privacy violations…while failing to meet its savings goals.

Trade tariffs have had a mixed fiscal impact. In April, US imports fell by 20%, the largest monthly drop on record, and helped halve the trade deficit.⁶ But ultimately, while tariff revenues offer some deficit relief, they are overshadowed by the fiscal burden of the One Big Beautiful Bill.

The US is the world’s largest oil producer, with output exceeding 13 million barrels/day in 2024.

3. Increasing US energy production by 3 million barrels of oil per day

Alongside fiscal reform, energy independence forms the third prong of the 3-3-3 strategy, with ambitious goals for boosting domestic oil production.

The US is the world’s largest oil producer, with output exceeding 13 million barrels/day in 2024.⁷ By easing regulations on the oil and gas industry, the goal is to lower energy costs for consumers and businesses, which could help boost spending and investment. Reaching this target would also reinforce America’s position as the world’s leading energy producer.

However, the plan faces challenges: while energy companies support deregulation, they are wary of oversupply driving prices down. Indeed, in July, the International Energy Agency forecasted global oil demand to grow at the slowest pace since 2009 (outside of the Covid-19 pandemic), flagging the economic uncertainty caused by trade tariffs. In the US specifically, oil demand was down 60,000 barrels per day, and the IEA forecasted a decline in US oil demand through to 2030.

Meanwhile, the US oil industry faces a labour shortage, with skilled workers in high demand – a constraint that could limit production growth.⁸

Current market environment

These policy ambitions unfold against a complex market backdrop. Despite early disruptions in Q1 2025 from tariff announcements, US equities reached record highs in late Q2, driven in particular by renewed investor interest in tech stocks. Markets have so far remained resilient to slower earnings growth, rising inflation, and slower GDP growth. Meanwhile, despite fears earlier this year of bond vigilantism, bond yields have actually declined slightly this year, reflecting a muted response to fiscal pressures.⁹

Final thoughts

Scott Bessent’s 3-3-3 plan certainly offers a bold vision for economic transformation in the US, but its implementation reveals significant challenges. While tax cuts and deregulation may buoy business sentiment and equity markets in the short term, sustained fiscal imbalances and inflationary risks could eventually weigh on equity market performance and bond yields. For investors, navigating this landscape will require balancing optimism around deregulation and energy expansion with caution amid macroeconomic and policy uncertainty.