WASHINGTON – President-elect Donald Trump’s pick to lead the U.S. Treasury, Steven Mnuchin, said on Wednesday the administration would make tax reform and trade pact overhauls top priorities in order to achieve a sustained pace of 3 percent to 4 percent economic growth.
The one-time Goldman Sachs banker, together with Wilbur Ross, Trump’s nominee for commerce secretary, outlined Trump’s economic agenda, including what Mnuchin called the largest tax overhaul since the Ronald Reagan administration, in an interview on CNBC.
Trump, throughout his presidential campaign, pledged to redraw trade deals to win back American jobs. He has threatened Mexico and China with punitive tariffs that some economists have warned could spark a trade war that could potentially roll back decades of liberalization.
Mnuchin and Ross said trade reform would be a top agenda item in the new administration. Both men criticized regional trade pacts, saying they favor bilateral agreements with trade partners.
“There’s trade, there’s sensible trade and there’s dumb trade. We’ve been doing a lot of dumb trade,” Ross said.
Trump has vowed to kill the Trans-Pacific Partnership, an ambitious Asia-Pacific trade pact linking the United States and 11 countries.
Mnuchin said the Treasury and Commerce Departments have trade enforcement capabilities. With regard to China’s foreign exchange policy, he said on CNBC, “If we determine we need to label them as a currency manipulator, that’s something the Treasury would do.”
Ross told FBN the United States will impose tariffs if necessary. “There’ll be especially tariffs for punitive purposes for people who dump,” he said.
Mnuchin and Ross also criticized the financial reform legislation known as Dodd-Frank, passed after the 2007-8 financial crisis, as too complicated and as cutting back lending.
Asked on CNBC about Federal Reserve Chair Janet Yellen’s performance, both men said they believed she had done a good job. That assessment conflicts with Trump’s earlier criticism of Yellen during the campaign.
Mnuchin said the president-elect’s tax plan won’t ultimately cut taxes for “the upper class,” which would be a major shift from the tax plan Trump proposed during the campaign.
“Any reductions we have in upper-income taxes will be offset by less deductions so that there will be no absolute tax cut for the upper class,” Mnuchin told CNBC.
That departs from Trump’s published tax plan on his website, which said as of Wednesday he would “reduce taxes across-the-board,” but especially for working-class and middle-income Americans.
Mnuchin told CNBC that the upper-income gains under Trump’s tax plan would be “offset by less deductions that pay for it” but provided little specificity other than to say he would limit tax breaks in areas such as mortgage interest, one of the most expensive and politically popular tax expenditures in the federal code. He indicated that charitable giving, another expensive tax break, would remain.
“We’ll still let you do charities but there’ll be other deductions that will be absolutely limited,” Mnuchin said. “We’ll cap mortgage interest but allow some deductibility.”
Mnuchin also signaled a desire to remove U.S. mortgage-finance companies Fannie Mae and Freddie Mac from government ownership, a move that could have wide-ranging ramifications for how Americans pay for their homes.
Mnuchin and Ross reinforced the sweeping proposals Trump put forth in September to simplify the tax code and slash the corporate tax rate to 15 percent, cutting the top rate for all businesses from the present 35 percent.
“We think by cutting corporate taxes we’ll create huge economic growth and we’ll have huge personal income,” Mnuchin said in the interview.
Tax experts have questioned Trump’s assertion that the proposals would not add to the nation’s debt and deficit.
Mnuchin and Ross said lower tax rates would be offset by reductions in the number of income tax deductions.
“Taxes are way too complicated and people spend way too much time worrying about ways to get them lower,” Mnuchin said.
He also said the administration would cap mortgage interest deductibility but would allow for some deductions.
In a separate interview on Fox Business Network, Mnuchin said a major tax reform that includes a large middle-income tax cut would be achieved within 90 days of the Trump presidency.
He also said he expected to reach 3 percent to 4 percent economic growth in the next couple of years. “I think it’s very achievable,” Mnuchin told FBN.
Mnuchin also told FBN that mortgage giants Fannie Mae and Freddie Mac must get out of government ownership. Common shares of both, which trade on the lightly-regulated Pink Sheets market, shot up by around 30 percent to their highest levels in more than two years.
The two companies have operated under Treasury Department conservatorship since the 2008 financial crisis, when plunging home prices crippled their finances and threatened to bring down the U.S. financial system. Repeated efforts since then to reform the U.S. housing finance system have foundered in Congress.
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