Treasury Secretary Scott Bessent expressed strong confidence in the trajectory of the U.S. economy, signaling that despite an $11 billion permanent hit from the 43-day government shutdown, recession risks remain contained. His comments arrive at a pivotal moment for markets, which have been grappling with mixed signals on growth, inflation, and the path of Federal Reserve policy. Bessent’s message was unambiguous: interest-rate-sensitive sectors have weakened, but the broader economy retains enough momentum to avoid a downturn heading into 2026.

Shutdown Impact and the Strength of the Broader Economy

Speaking on NBC’s “Meet the Press,” Bessent confirmed that the shutdown delivered a meaningful blow to economic output. The $11 billion in lost activity, now deemed permanent by Treasury calculations, reflects not only federal worker disruptions but spillover effects into private-sector operations.

Yet Bessent argued the setback does not place the economy at recessionary risk. Housing and other rate-sensitive sectors have indeed experienced recession-like conditions after a prolonged tightening cycle, he said, but the services sector remains resilient enough to keep the national economy expanding.

His remarks contrast with broader market fears that the U.S. could struggle to regain momentum following months of political gridlock, volatile inflation readings, and uncertainty over Fed policy. Instead, Bessent projected a clear path toward stronger growth in 2026, citing early indicators of cooling prices and firming demand.

Inflation Dynamics and Policy Responses

Bessent placed responsibility for lingering inflation primarily on the services sector rather than the administration’s own tariffs—a position long held by the White House. He emphasized that recent declines in energy prices, along with targeted tariff reductions on food imports like bananas and coffee, should accelerate disinflation into next year.

He also argued that inflation is increasingly uneven across the country. States governed by Democrats, he said, are experiencing inflation roughly 0.5 percentage points higher than those run by Republicans, attributing the gap to heavier regulatory environments.

Policy initiatives announced by the administration aim to bolster real household incomes while easing inflationary pressure. These include capping taxes on overtime pay, cutting taxes on tips and Social Security income for certain workers, and making auto loan interest deductible. Bessent predicted these measures would deliver “substantial” federal tax refunds in early 2026, enhancing disposable income at a critical moment for household spending.

Political Dynamics and Fiscal Uncertainty

The Treasury chief also weighed in on Washington’s ongoing budget tensions. Following the passage of temporary funding through January 30, he warned that another shutdown risks renewed economic turbulence. He echoed President Trump’s call for Republicans to eliminate the filibuster should Democrats force another closure—a maneuver he did not confirm had sufficient support.

Beyond fiscal politics, Bessent hinted at an upcoming plan to reduce health-care costs but offered few details. Meanwhile, he positioned a slate of recently negotiated trade deals as catalysts for investment, noting that new manufacturing plants are likely to break ground in multiple states.

Forward Outlook: What Investors Should Watch

Bessent’s optimism sets a clear narrative heading into 2026: structural tailwinds from lower rates, tax relief, and disinflation could support a soft landing, provided political risks do not reintroduce volatility. For investors, the key variables will be the pace of inflation moderation, the strength of consumer demand once refunds arrive, and the stability of the political environment. If these align, the U.S. may yet avoid the recession fears that have hovered over markets for much of the year.