Bessent ties Minnesota fraud recoveries to funding Trump’s proposed $1.5T defense budget
Treasury Secretary Scott Bessent told the Minnesota Economic Club that the Biden administration—sorry, the Trump administration—will intensify efforts to claw back an estimated $9 billion from what he called a major Minnesota welfare fraud and pursue similar recoveries nationwide, saying those funds could help make President Trump’s proposed jump in the 2027 defense budget—from $901 billion to $1.5 trillion—affordable without raising taxes. The proposal more broadly hinges on tariff revenues and tighter oversight of defense contractors (including threats to cut Pentagon business with firms like Raytheon over buybacks), has prompted immediate drops in defense stocks, and faces watchdog estimates that the plan would cost roughly $5 trillion from 2027–2035.
📌 Key Facts
- President Trump proposed a $1.5 trillion defense budget for 2027, a jump from the 2026 defense level of $901 billion — roughly a 66% increase.
- Trump framed the spending surge as a response to “troubled and dangerous times,” linking it to recent geopolitical moves (including the U.S. operation to capture Nicolás Maduro), a U.S. force buildup in the Caribbean, and floated actions toward Greenland and Colombia, and called the effort building a 'Dream Military.'
- Trump says higher tariffs will generate the revenue to fund the military buildup, pay down debt, and provide a taxpayer 'dividend'; Bipartisan Policy Center figures cited show tariff and excise revenues rising to $288.5 billion in 2025 from $98.3 billion in 2024.
- The Committee for a Responsible Federal Budget estimates the proposal would cost about $5 trillion from 2027–2035 (about $5.7 trillion with interest) and that tariff revenues would cover roughly half (~$2.5 trillion; ~$3 trillion with interest); a Supreme Court ruling on the legality of the administration’s tariff strategy is expected soon.
- Trump publicly threatened to block Pentagon purchases from defense firms — explicitly targeting Raytheon — unless they stop stock buybacks, invest more in plants and equipment, and curb dividends and 'exorbitant' executive pay; reports named key Raytheon products (Tomahawk, Javelin, Stinger, Sidewinder) and Pratt & Whitney F‑35 engines as potentially affected.
- Markets reacted to Trump’s comments: shares of major defense contractors fell (reported declines include Northrop Grumman ~5.5%, Lockheed Martin ~4.8%, and RTX ~2.5%).
- Treasury Secretary Scott Bessent told the Minnesota Economic Club on Jan. 8, 2026 that the $1.5 trillion defense plan would be affordable 'if we can get the money back from fraud,' citing an estimated $9 billion Minnesota welfare fraud as 'ground zero' and identifying it as a key target for federal clawbacks.
- Bessent said the Treasury is intensifying efforts to recover federal dollars lost to welfare fraud, prosecute perpetrators, and investigate similar schemes 'state by state,' framing aggressive fraud enforcement as part of the administration’s strategy to fund national security priorities without raising taxes; he also criticized Gov. Tim Walz’s stewardship in that context.
📊 Relevant Data
Somalis constitute approximately 2% of Minnesota's population, with about 107,000 people of Somali descent living in the state as of 2024.
By the numbers: Minnesota's Somali population, according to census data — KTTC
In the Feeding Our Future welfare fraud scandal in Minnesota, 78 individuals have been indicted, with the fraud perpetuated mainly by Somali immigrants, indicating overrepresentation given Somalis are only about 2% of the state's population.
How Misreading Somali Poverty Led Minnesota into Its Largest Welfare Scandal — American Enterprise Institute (AEI)
The Refugee Act of 1980 established the framework for refugee admissions, facilitating the resettlement of Somali refugees in Minnesota starting in the 1990s, which contributed to the growth of the Somali community in the state.
Somali and Somali American Experiences in Minnesota — MNopedia (Minnesota Historical Society)
📊 Analysis & Commentary (1)
"The City Journal piece is a critical take arguing that the administration’s big spending and affordability proposals (anchored publicly to recoveries, seizures and tariff revenue) are fiscally unrealistic and dangerously reliant on one‑off or legally contested revenue sources."
📰 Source Timeline (5)
Follow how coverage of this story developed over time
- Treasury Secretary Scott Bessent, speaking at the Minnesota Economic Club on Jan. 8, 2026, said President Trump’s proposed $1.5 trillion defense spending plan would be affordable 'if we can get the money back from fraud.'
- Bessent specifically cited Minnesota as 'ground zero' for what he called one of the most egregious welfare scams in U.S. history and framed an estimated $9 billion Minnesota fraud scandal as a key target for clawbacks.
- He pledged that the U.S. Treasury is intensifying efforts to recover federal dollars lost to welfare fraud, prosecute 'fraudulent criminals,' and investigate similar schemes 'state by state.'
- Bessent linked aggressive fraud enforcement to a broader Trump administration strategy of funding national security priorities without raising taxes.
- He also criticized Gov. Tim Walz’s stewardship, saying billions meant for families, disabled seniors, and children were diverted to fraudsters, and cast Trump’s agenda as an 'invitation' for Minnesota to regain its economic standing.
- Trump’s Truth Social post explicitly links the $1.5 trillion 2027 defense budget to what he calls a tariff-driven cash surplus, saying tariffs can fund the buildup, pay down debt, and provide a 'dividend' to moderate‑income Americans.
- The Committee for a Responsible Federal Budget estimates the proposal would cost about $5 trillion from 2027–2035 ($5.7 trillion with interest), with tariff revenues covering roughly half ($2.5 trillion; $3 trillion with interest).
- Trump publicly states he will not allow defense companies to conduct stock buybacks, pay 'exorbitant' executive compensation, or issue dividends, criticizing them for slow production and poor maintenance of equipment.
- The article notes that defense stocks dipped earlier in the day after Trump condemned the performance of major defense contractors.
- It reiterates that a Supreme Court ruling expected Friday will determine the legality of Trump’s sweeping tariff strategy that underpins his funding claims.
- CBS specifies that the 2026 military budget is $901 billion, making the proposed 2027 level a 66% increase.
- Article details that the Pentagon just received about $175 billion more in last year's GOP 'big, beautiful' tax-and-spending bill, providing recent baseline context.
- Provides fresh Bipartisan Policy Center figures: gross tariff and excise-tax revenues rose to $288.5 billion in 2025 from $98.3 billion in 2024, used by Trump to justify the spending surge.
- Notes that Trump argues tariffs could simultaneously fund military buildup, taxpayer 'dividends,' and debt reduction, highlighting the fiscal gap between revenues and his promises.
- Adds detailed quotes from Trump’s Truth Social posts about building a 'Dream Military' and explicitly tying the proposal to 'troubled and dangerous times.'
- Gives more granular detail on his public threat to cut Raytheon off from Pentagon business if it continues stock buybacks instead of expanding plants and equipment, including his condition that the firm cease new buybacks to obtain future contracts.
- Lists some of Raytheon’s key products (Tomahawk, Javelin, Stinger, Sidewinder; Pratt & Whitney jet engines for the F‑35 and other aircraft) to illustrate the potential impact of his threat.
- Connects the budget proposal more explicitly to Trump's broader 'Don-roe Doctrine' interventionist posture in the Western Hemisphere, including floated actions toward Greenland and Colombia and ominous comments about Cuba.
- Reports that shares of large defense contractors, including Northrop and likely others, fell in response to Trump’s comments, indicating immediate market reaction (truncated but implied in the text).
- Confirms that the 2026 defense budget is set at $901 billion, framing the 2027 request as a jump from $901 billion to $1.5 trillion.
- Provides fuller geopolitical context: Trump links the proposed spending surge to 'troubled and dangerous times' following the U.S. operation to capture Nicolás Maduro, ongoing U.S. force buildup in the Caribbean, talk of taking over Greenland, and openness to potential military operations in Colombia.
- Details Trump’s explicit social‑media threat to cut off Pentagon purchases from Raytheon unless it halts stock buybacks and invests more in plants and equipment.
- Reports immediate market reaction: defense contractor shares fell, including Northrop Grumman down 5.5%, Lockheed Martin down 4.8%, and RTX (Raytheon’s parent) down 2.5%.
- Quotes Trump’s justification that higher tariffs are generating the revenue that makes him 'comfortable' with the proposed defense‑spending surge.