(Bloomberg) -- Whether he calls it a "blip," "transitory" or "transient," Treasury Secretary Scott Bessent has taken to describing inflation in a way that came back to haunt his predecessor and the previous administration.
"Except for inflation — which is I believe going to be a short term blip — the economic data is very strong," Bessent said in a Senate Finance Committee hearing on Wednesday.
It was the latest example of the Treasury chief characterizing the surge in prices since the Iran war began as a one-off hit. The overall consumer price index climbed 3.8% in April, the most since 2023, propelled by higher energy prices amid the Strait of Hormuz crisis.
Last month, Bessent said a global increase in bond yields reflected "a short term blip in inflation that I believe is transient." And at a White House cabinet meeting, he said, "I believe the prices are transitory."
Transitory was a word Bessent's predecessor, Janet Yellen, came to regret. After using it in 2021 to describe the rise in the cost of living as the economy reopened after the initial Covid shock, she later said, "Maybe a better word could have been chosen."
Democrats went on to suffer voter retribution for the inflation surge in the 2024 election. Now, Republicans face the risk of anger over the jump in gasoline and other essentials damaging them in November midterm congressional elections.
The latest rise in prices remains a fraction of the 2021-22 experience, when the CPI at one point skyrocketed over 9%. Bessent has drawn a sharp distinction between the causes of the episodes.
"I firmly believe that nothing is more transient than a supply shock," he said in May. In the cabinet meeting, he underlined his view that energy prices will retreat once the Iran conflict is over. "Oil will be lower than pre-conflict levels when this ends," and natural gas had already retreated, he said.
By contrast, he blamed "very expansionary fiscal policy that was financed by debt purchases from the central bank" for inflation in the Biden administration. Speaking in a CNBC interview, he was alluding to President Joe Biden's 2021 fiscal stimulus package, along with large-scale purchases of Treasuries by the Federal Reserve.
Budget Deficit
Yellen, for her part, repeatedly defended the fiscal stimulus, and highlighted that high inflation was a global phenomenon in 2022, as nations round the world were beset by supply shortages and shifts in demand.
Bessent said on CNBC that he "was never on team transient during Covid." Now, he argues that damage to household budgets is limited, and regularly touts the benefits of the Trump administration's tax cuts as bolstering Americans' spending firepower.
In his first of two days of congressional hearings on Wednesday, Bessent also recommitted to his target of shrinking the federal budget deficit to less than 4% — "something with a 3 in front of it" — by the time President Donald Trump leaves office.
Most economists expect the gap to widen this year back above 6%, thanks in part to higher defense spending, along with the Treasury's continuing rise in interest costs. Social Security and Medicare payments also continue to boost federal outlays.
"We brought it down to 5.4, we're going to continue moving," Bessent said Wednesday.
Pressed by Republican Senator Bill Cassidy about the health of Social Security, which faces insolvency in several years, Bessent said the administration's first priority is dealing with the immediate fiscal outlook. Cassidy asked whether the administration would be willing to work with lawmakers on devising a solution for the giant retirement program.
"We will work on anything, but we are going to guarantee that the benefits remain as they are," Bessent answered.
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