US Treasury secretary Steve Mnuchin covered a lot of ground in his appearance today at Delivering Alpha, an annual investor conference in New York.
Speaking to an audience that oversees a combined $3 trillion in investable assets, Mnuchin was eager to allay concerns about the long-term economic impact of the recent storms that struck the US south. He was less interested in soothing fears about the future of carried interest, the massive US tax benefit for hedge funds. (The Trump administration plans to close the loophole.)
“I know this issue is incredibly important to everybody in this room,” Mnuchin acknowledged. “It’s less important to the American public and [less important than] creating jobs.”
Here’s a rundown of Mnuchin’s responses to the wide range of questions he fielded from three CNBC personalities during his half hour on stage at the Sept. 12 conference, hosted by CNBC and Institutional Investor.
On the US economic impact of the recent hurricanes
“There clearly is going to be an impact on GDP in the short run. We will make it up in the long run as we rebuild. … It won’t have a bad impact on the economy” overall.
On Janet Yellen’s future at the Federal Reserve
“I’m working closely with the president on the issue. He hasn’t made any decisions. There’s a lot of good people. The chair is obviously quite talented and she’s been considered but there are a lot of good people that we’re meeting with as well.”
On White House economic advisor Gary Cohn’s future at the Federal Reserve (or anywhere in Washington)
“I appreciate you asking me [about Cohn’s odds of landing the Fed chair role] and I’d be disappointed if you didn’t, but I obviously will respect the confidentiality of the process.
“Gary and I have worked very close together for a long period of time. … We were in the same partner class at Goldman Sachs. We’re working very closely together on taxes. … We’ll both be at the White House for a dinner with the president tonight on tax reform.”
On Donald Trump siding with Democrats Chuck Schumer and Nancy Pelosi in calling for a three-month increase in the US debt ceiling
“I give the president a lot of credit. We were in the middle of two major hurricanes, we needed to get money to the states … and the president was very clear he wanted to cut a deal, he wanted to cut a deal quickly. We got out of there and showed the American public that we’re putting politics aside.
“I don’t want to downplay it because I think it was important that the president reached out to Democrats and showed that he could get things done on a bipartisan basis. … [But] the president is absolutely a Republican—as am I, by the way.”
On not getting an 18-month extension on the debt ceiling, as Mnuchin was hoping for
“Permanent is better than temporary, and temporary is better than nothing.
“Congress has every right to control spending, and if ultimately the government shuts down, that’s their right, if they can’t agree on spending. [But] the debt ceiling is about paying for things that we’ve already committed to. [And] we have the commitment from the Democrats and the Republicans that we’re never going to let the government default.
“We have the continuing funding of the government through Dec. 8. … and for December, we will be negotiating funding. We could have done a one-year deal on the debt ceiling … but the president wants to raise military spending. That’s one of his main priorities. That’s something he’s going to demand for December.”
On the prospects for US tax reform
“It’s been my number one priority, it will be my number one priority. I’ve always said our hope is that it is bipartisan.
“We have one of the highest tax rates in the world. If we can’t get 60 votes [in Congress], we’re prepared to use reconciliation to get it done. This is the most important issue for the American economy.”
Would a corporate tax rate in the mid-20s-percent range be a win for Republicans on tax reform?
“Ideally [the president] would like to get it down to 15%. I don’t know if we’ll be able to achieve that given the budget issues. But we’re going to get this down to a competitive level.
“This is a pass/fail exercise. Passing tax reform, which hasn’t been done in 31 years? That’s a win.”
On the impact Americans in high-tax states will feel if they can no longer get a federal-tax deduction on state and local taxes
“We’re looking at a system where we get rid of state and local tax deductions. So in the high tax states …. yes, I can assure you that there will not be a tax decrease.
“I’m hopeful in these states that taxes don’t go up, so we’ll have a slight [federal] rate decrease on the high end to offset the [loss of] deductions. But again, these are the details that, although the group of six has a plan, are going to go through final negotiation.”
On concerns that the reforms would prompt financial engineering by the rich to have their income taxed at a much lower rate for passthrough businesses, rather than as personal income
“If you earn money that’s clearly income, if you’re an accountant firm and that’s clearly income, you’ll be taxed at income rates. You won’t be taxed at passthrough rates.”
On whether tax reform and infrastructure spending will be packaged together in an attempt to pass them in a grand compromise
“People have asked us whether we should put them together or not. My inclination is that it makes it more complicated. But to the extent that the Democrats and Republicans want to put it together, Congress has that option.”
On fighting North Korea’s saber rattling with economic sanctions and increased pressure from China
“I probably spend 50% of my time on national security. [Economic] sanctions work. They worked with Iran. … And in North Korea, economic warfare works.”
As a result of the UN Security Council resolution on North Korea sanctions that passed unanimously on Sept. 11, “[w]e now have more tools in our toolbox and we will use them. I think we’ve absolutely moved the needle on China; I think what they agreed to yesterday was historic. … [and] if China doesn’t follow these sanctions, we will put additional sanctions on them.”
As to whether making good on that threat would invite retaliation by China against US-based multinationals, “the president’s number one concern is North Korea, and is security. So when it comes to North Korea, our number one priority is the safety of the American people, not the economics of multinational companies.”
On the Equifax data breach and cyber security
“Americans shouldn’t expect these things to happen. This is something that I am actively involved in. Cyber is a big focus of mine for two reasons: one, I oversee the IRS, so we have an incredible amount of personal information [to protect], and two, I’m concerned about the global financial system and keeping it protected.
“You have both international and government actors, as well as you have private people. Our number one concern is making sure that the data is safe and working with the industry on that. I think public-private partnerships on cyber is critical. This is not something the private sector can do alone, and it’s not something the government can do alone.”
On disapproval of the administration from the private sector and the recent disbanding of the CEO councils that were meant to advise president Trump
“I think CEOs have a responsibility to their company, and that’s their responsibility, but they also have responsibilities to advise the government. And every time there’s an issue that the government does that CEOs say, ‘We don’t like this and we’re not going to give you advice anymore,’ that doesn’t make sense. The purpose of the councils was to give the president advice. I think there’s still plenty of CEOs who come in to meet with us and we’ll continue to reach out, but I think it was a mistake that the councils were disbanded.”
On his own plans for serving the administration
“I’m definitely staying on. It’s a great opportunity to serve the president and the country.
“I’ve known the president for over 15 years, I worked with him on the campaign. I obviously feel comfortable telling him my ideas on things. He’s the president and I respect that, and no different than the lieutenant who reports to the general, I work for him.”