Winning the AI Race Part 4: Scott Bessent, Howard Lutnick, Chris Wright, and Doug Burgum

3-3-3 Economic Plan and Deficit Trajectory

• Secretary Besson outlined a "3-3-3" campaign plan targeting three specific metrics:
  • Reduce the federal budget deficit to 3% of GDP (down from the prior 6.7%).
  • Achieve persistent 3%+ annual economic growth.
  • Create three million additional barrels per day of energy equivalent (oil and gas).
• The U.S. Treasury recorded its first surplus since 2015 in June, driven by increased revenue from tariffs and reduced spending.
• Besson projects that AI-driven productivity will accelerate growth, potentially creating a non-inflationary boom similar to the 1990s IT boom, which previously eliminated the national debt.

AI Capital Expenditure and Economic Paradox

• Hyperscalers (the "big five" or "big seven") are committing approximately 1% of GDP annually to AI CapEx, totaling roughly $300 billion.
• Besson anticipates a "hand-off" around 2026 where massive construction and CapEx spending transitions into a productivity boom.
• This spending defies traditional economic theory by occurring without immediate negative inflationary effects.

Trade Policy, Tariffs, and Market Adaptation

• Foreign producers (including Chinese manufacturers) and U.S. companies are absorbing tariff costs to maintain market share rather than raising prices immediately.
• Tariffs are currently driving "on-shoring" decisions, exemplified by AstraZeneca's planned $50 billion investment in a U.S. plant.
• The administration estimates tariff revenue will reach at least $300 billion on a forward 12-month basis.
• A deadline of August 1st has been set; if trade deals are not finalized by then, default tariff rates will increase.
• Secretary Mnuchin announced a $515 billion commitment from Japan to finance U.S. infrastructure and energy projects (nuclear, fabs, shipbuilding) with a 90/10 profit split favoring the U.S.
  • Japan will provide direct capital (a "signing bonus") rather than loans, with 90% of lease/operation profits going to the U.S.

Federal Reserve, Interest Rates, and Monetary Policy

• Besson argues that tariffs represent a one-time price level increase, not a persistent inflationary spiral, and that the Fed should recognize this distinction.
• He expressed concern that the Fed's inflation projections are politically biased and referred to current Fed skepticism as "Tariff Derangement Syndrome."
• Besson predicts the Fed will implement one to two rate cuts this year once tariff inflation impacts are confirmed as non-persistent.
• The administration plans to leverage new Treasury legislation to create trillions of dollars in demand for T-bills within 90 days.
• Secretary Besson advocates for the use of U.S. dollar-backed stable coins over Central Bank Digital Currencies (CBDCs) to avoid potential government account freezes.

Energy Dominance and the AI Power Race

• The National Energy Dominance Council is prioritizing the removal of regulatory barriers to accelerate energy production for the AI arms race against China.
• China is adding roughly 94 gigawatts of coal capacity annually; the U.S. strategy involves stopping the closure of existing baseload plants (hydro, coal, nuclear).
• Natural gas is identified as the dominant source for new U.S. electricity generation due to its speed, cost, and reliability compared to intermittent solar/wind.
• Besson and Secretary Bergman noted that while solar is cheaper to install, U.S. batteries can only store five minutes of the nation's total power, rendering solar unreliable for peak demand.
• The administration has issued an invitation to 300 entities for 16 selected data center sites, with four to be announced immediately.
• Four executive orders on nuclear energy were signed six weeks ago, triggering significant venture capital inflow into Small Modular Reactor (SMR) startups.
• Secretary Bergman stated that next-generation Gen-4 reactors (pebble bed) could be critical at the Idaho National Lab by next summer, though they are not a solution for the immediate 24-month AI demand.

Legislative and Permitting Reforms

• The "One Big Beautiful Bill" includes 100% immediate expensing of equipment and factory structures for the next five years.
• The administration plans to overhaul FERC's queue system and restore NEPA to a process check to prevent "lawfare" from halting construction.
• The Clean Power Act 2.0 (mandating carbon capture for new gas plants) is expected to be repealed to allow natural gas to power AI infrastructure.
• Besson emphasized that the U.S. has made it too difficult to build, citing TSMC's delays in Arizona due to local permitting issues.

China, Tech Security, and Export Controls

• The administration is adopting a "below the line / above the line" trade strategy:
  • Below the line: Encouraging trade in non-sensitive goods (e.g., soybeans, baby clothes).
  • Above the line: Restricting exports of critical technology (e.g., Blackwell chips, hypersonics) and countering Chinese surveillance.
• The administration views TikTok as a national security threat due to Chinese ownership and is open to a deal where it is acquired by American entities controlled by American technology stacks.
• Future chip export controls will likely be determined by cluster size and operator trust rather than blanket bans on allies.
• The administration is considering an "AI economic zone" framework where trusted partners receive preferential access to U.S. technology under strict American operational oversight.

Labor Market and Job Creation

• The AI and energy build-out is expected to create a massive demand for trade workers, potentially offering $120,000–$150,000 starting salaries without requiring college degrees.
• Manufacturing and AI factory construction are projected to generate indirect jobs at a 10x ratio to direct employment.
• The administration encourages companies to site operations near "stranded gas" (Marcellus, Permian, Bakken) to avoid the regulatory delays of building transmission lines and pipelines.