Treasury Secretary Mnuchin says he feels obligated to help the middle class
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Amidst a boisterous crowd, Treasury Secretary Steven Mnuchin briefly lectured students and visitors at the UCLA Burkle Center for International Relations in Los Angeles before settling in for an interview with Marketplace host Kai Ryssdal. The wide-ranging interview touched on topics as diverse as the Trump administration’s stance on North Korea, the impact of the recently passed tax overhaul and the Trans-Pacific Partnership. Below is an edited version of the interview. To hear the full interview and audience Q&A session, click on the audio player at the end of the story. Additionally, UCLA has published video of the entire event.
Kai Ryssdal: First of all, thank you all for coming. I appreciate you taking the time on this afternoon. Secretary, thank you also for your time. Let me ask you a kind of a framing question here. There was a story I read in researching this talking about you being the finance chairman for the Trump campaign. And people were saying, “Steve, why are you doing this?” And you said, “Look, if this works out, nobody nobody’s going to ask me why I was doing this.” So the question is, how is it working out for you?
Steven Mnuchin: Actually, the question was slightly different. OK. And let me first say, I consider it a great honor to serve the country. [Applause and hissing.] So I think we live in it, we live in a democracy. We’re lucky to live in this country. We’re lucky to have differences of opinions. And for me, I was never involved really in politics. Some people spend their entire life in politics. I recognized that there were certain issues that were in this country, and that’s that’s why I participated in the campaign. So, you know, that’s why I’m here.
Ryssdal: What was it about the president’s approach to the American economy that made you say, “I want to work for this guy”? [Hissing from audience.]
Audience: Ignore them.
Ryssdal: That’s a good point.
Mnuchin: No, I think they’re going to get more tired than I am. So, you know, that’s kind of —
Audience: Fat chance.
Mnuchin: Fat chance? Oh yeah, I’m dealing with students, I forgot. There’s a lot of students.
Ryssdal: So what was it about the president’s economic agenda made you say, “I want to do this and work on this?”
Mnuchin: I go back to the comment of the financial crisis impacted lots of people. I operated banks [hissing from audience] that were that went under during the financial crisis. I saw the impact of what went on and how important banks are to local communities and the economic issues. And I felt an obligation to try to do things that would help people and help the economy and particularly the middle class. And I think we’re very proud of these accomplishments.
Ryssdal: So we’ll get to that in a minute. We’ll get to the tax bill and all that in a minute. But I want to talk about the last section of your remarks here about the sanctions that you are in charge of and responsible for, specifically the North Korean sanctions that were announced on Friday, the new round. Sanctions, as you know, take years and decades to play out. The question is, do you, and more particularly, the president, have the patience to let them play out with North Korea?
Mnuchin: Well, I’m not going to comment on kind of what we’re going to do going forward and what patience we have and what patience we don’t have. But I don’t agree with you on your premise.
Ryssdal: That they take decades?
Mnuchin: Yeah, I don’t agree with that at all.
Ryssdal: North Korea’s been under sanctions for decades, sir. Iran under sanctions for decades. It is true.
Mnuchin: OK, well let me give you the facts, because this we can have a debate about. [Hissing from audience.]
Mnuchin: There’s 500 sanctions on North Korea since 2005. Basically half have been done in the last year. We have more sanctions authority now than we’ve ever had before. So for example, we have now powers that we can sanction anybody who’s doing trade with North Korea. So I would in all disrespect, I would, I would say, or respect, [laughter] I would say that these things take some time, but it is not decades, and we’ve seen evidence that they are already having an impact. But let me also make a comment. Our issue is not with the people of North Korea. So we want to be careful that we’re not doing things — there are things that we could sanction that impact the people. What we’re trying to do is cut down his ability to do ballistic missiles and nuclear weapons.
Ryssdal: And you’re satisfied that these sanctions you announced on Friday are tightening the noose?
Mnuchin: Absolutely. So what we started with was illegal ship-to-ship transfers. These are very granular. We now have identified ships that are violating U.N. sanctions, and these ships will be prevented from doing this again. We’ve also put out Coast Guard advisories. We’re working with the the Navy. This is a full effort across the government.
Ryssdal: As you know, Ivanka Trump was in South Korea [hissing from audience] for the Olympic delegation. She also, as you know, briefed the South Korean president, President Moon, on these sanctions. Given that she’s a family member of the president without a permanent security clearance, do you think that was appropriate?
Mnuchin: I absolutely think it was appropriate. [Hissing from audience.]
Ryssdal: How so?
Mnuchin: Again, she’s an assistant to the president. She didn’t travel as a family member. She traveled as assistant to the president. I briefed her. You’re not aware of what security clearance is needed one way or another for these things. [Hissing from audience.] And again I’m very comfortable with what she did representing the country on a very important issue, I might add.
Ryssdal: Let me take it to the tax law. [Hissing from audience.] You and the president and the Congress passed last year, the president signed it, it took effect on the first of January, as you know. During your confirmation hearings, you said whatever tax reform the Trump administration is going to work on will not add to the debt and the deficit.
Mnuchin: That’s true and I stand behind that. [Hissing from audience.]
Ryssdal: Sir, the tax bill that’s enforced now adds a trillion and a half dollars to the deficit.
Mnuchin: No, that’s not the case. [Hissing from audience.] The tax bill scored on a static basis adds a trillion and a half — let me just go through the numbers — there is a half a trillion dollars difference between what’s called baseline and policy. Those are things that were gonna be extended anyway. That takes the number down to a trillion dollars. We believe that, with 90 basis points of growth, there will be over —
Ryssdal: Why don’t you explain what 90 basis points means?
Mnuchin: Ninety basis points of GDP. So GDP going from basically 2.1 percent to 3 percent. And for you math majors in the room, the break even is about 35 basis points.
Ryssdal: So in other words, three-tenths of 1 percent on growth.
Mnuchin: That’s correct.
Ryssdal: OK. The catch of course is, and as you know, you did have two quarters of 3 percent economic growth this past year, but year-over-year growth in the American economy was 2.3 percent. So you’re still far away from the target, right?
Mnuchin: Absolutely. That’s why we’re doing all of these things. So these things have some impact. And all of our economic plans are about creating sustained economic growth. [Hissing from audience.]
Ryssdal: Help me understand then with some specificity how you’re going to do that. Because the numbers that were engineered by the White House and the Council of Economic Advisers that went into the tax plan were, “We’re going to get 3 percent. Here’s how,” as opposed to, “These are our policies, which is going to get us to 3 percent.”
Mnuchin: Well, you must seem to have a bias because you’re using the words “engineered,” [hissing from audience] so you obviously think that it was the policy the policies were created. Again, what I would say is we fundamentally believe that we will have economic growth, and again, 35 basis points is the break even. And we’re already seeing this. By the way, we’re seeing companies give millions and millions of workers [hissing from audience] bonuses all as a result of this. And for people who are getting these thousand-dollar bonuses, these are not crumbs.
Ryssdal: Absolutely not, and I’m not going to imply that at all. You said 4 million workers in this economy?
Mnuchin: Four and a half million.
Ryssdal: Four and a half million have gotten one-time bonuses.
Ryssdal: So this is a labor pool of 155 million people, sir.
Mnuchin: So are you, tell me, are you, for those four and a half million workers —
Ryssdal: So my question is —
Mnuchin: in one month. That’s a big deal. That’s a big deal. Four and a half million workers have already seen this impact.
Ryssdal: By some estimates —
Mnuchin: I understand you’re doing the math.
Ryssdal: No. So the Americans for Tax Reform say plus or minus, 86 companies have given wage increases, 250 companies have given one-time bonuses, and I guess the question is, what would you rather have? Would you rather have a one-time bonus or a consistent wage increase over the next couple of years?
Mnuchin: We fundamentally believe that there will be wage increases going through to the workers. [Hissing from audience.]
Ryssdal: Why do you believe that?
Mnuchin: Again, I just went through why we believe it. It’s a function of economic policy, it’s a function of making a more competitive system that companies can invest. And again, there is research that 70 percent of the tax burden is borne by the workers. So this is all about making a more competitive U.S. system for jobs. [Applause.] Thank you.
Ryssdal: So let me ask you about something you said about 10 days, two weeks ago that after the president said at Davos, “You know what, we might get into the Trans-Pacific Partnership” the Obama-negotiated deal that President Trump pull this out early in his administration. President said, “You know, I might be able to get back into that if we could work out a way that’s advantageous.” And you said the other day the president and his administration will be willing to go, and these are your words, go multilateral. That deal is going to be signed and done on the eighth of March, sir. So what interest do you think the other Trans-Pacific Partnership countries —
Mnuchin: I think they have a lot of interest. I’ve met with them a lot recently. And to the extent that they they are absolutely willing to have discussions with the United States if that’s something we want to pursue.
Ryssdal: And you fully expect that they will let America back into the TPP?
Mnuchin: Again, it’s not a question of letting us back in or not letting us back in.
Ryssdal: Well, the president pulled us out, sir.
Mnuchin: Again, what I would say is they’re interested in us being in agreement. Right now the president is more focused on bilateral trades, and that’s our priority and that’s what we’re negotiating. What the president has said is kind of when we get done with the bilaterals that we’re focused on, to the extent that kind of the TPP will change, we will consider — not a question of whether they will let us back in — we will consider whether we want to go into the multilateral agreement.
Ryssdal: That sounds very much like, and I apologize for characterizing your words, but it sounds very much like you’re saying we will deign to have a conversation with them in which they might be allowed to trade with us.
Mnuchin: That’s not what I said. So again let me just, let’s just be clear. The United States is the largest trading market in the world. Everybody wants to do business in the United States. The United States has the lowest tariffs, has the lowest barriers. Every single country wants to do business in the United States. And, by the way, to the extent that we can do business with other countries on the exact same terms, OK, and our companies can be treated the exact same way, we believe in reciprocal free trade. So that’s our objective.
Ryssdal: One of the one of the things the president has said and his advisers have said is, “Listen, we need to fix regulation in this country, financial regulation, the Dodd-Frank financial reform law is too strict, we need to loosen it up a little bit.” Brian Moynihan, the CEO of BofA, said the other day, “Dodd-Frank’s fine. What are we doing?”
Mnuchin: You know why? Because the top eight banks control all the assets in the United States and they don’t want anybody else to compete. So what we’re trying to do, and by the way, there is bipartisan support for this, and I think this legislation will be passed in the next three months to modify Dodd-Frank so that commercial banks, regional banks, community banks can succeed. Our objective is we don’t want just eight large banks in the United States. So the modifications on Dodd-Frank are all designed to help community banks and regional banks.
Ryssdal: Even though community banks are making record profits this past year.
Mnuchin: Again, that’s because the economy is doing better. But yes. Do you want them all to be gobbled up by Brian Moynihan? No. We want to make sure that we have a healthy broad-based banking system.
Updated (March 6, 2018): This story has been updated to include more audience reaction.
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