Joe Kernen: I don’t think the appointments are actually official yet, but can you gentlemen confirm this has happened?
Steven Mnuchin: We can, indeed. We’re thrilled to be here and we’re thrilled to work for the president-elect and honored to have these positions.
Andrew Ross Sorkin: Congratulations.
Kernen: Let’s start with this. It’s a two-prong question. Number one, because we talk about it all the time. What isthe potential GDP growth for this U.S. economy, number one? What do you guyssee it as that we can average?
Mnuchin: It’s seasonally adjusted this quarter but I believe we can have sustained growth at that level. And to get there our number one priority is tax reform. This will be the largest tax change since Reagan. We’ve talked about this during the campaign.Wilbur and I have worked very closely together on the campaign. We’re going to cut corporate taxes which will bring huge amounts of jobs back to the United States.
Kernen: Where do you think you can get to on that?
Mnuchin: Fifteen percent and bring a lot of cashback into the U.S.
Kernen: Is it possible, Andrew, to get to 15 percent?
Sorkin: It may be. We had a couple of different guests on —
Kernen: You think 25 percent.
Sorkin: We had a guest on earlier in the morning, a Washington analyst who was suggesting they thought that the conversation would start at 15 percent and potentially could creep up.
Mnuchin:I would first just say that corporate taxes are one component of revenues to the government. OK? And the main component is obviously personal income and personal taxes. So we’ll think by cutting corporate taxes will create huge economic growth. And we’ll have huge personal income. So the revenues will be offset on the other side. We’ll have a big middle income tax cut. That’s another big part of this in simplifying taxes. Taxes are way too complicated and people spend way too much time worrying about ways to get them lower.
Kernen: Is dynamic scoring going to come back into people believing it? Because people — we have people on that just flat out on the left say there is no proof that it ever works. I don’t see how they can come up with that. You get more taxes. Do you not?
Mnuchin: Of course it works and of course you have to have dynamic scoring. It would make no sense otherwise. And we’re going to work with Congress. I think they understand that.
Michelle Caruso-Cabrera: Dynamic scoring means that when you cut taxes, some people believe that that changes behavior which leads to more revenue. Left has argued that there’s no proof of that, supposedly.
Wilbur Ross: Well, this administration will prove it.
Kernen: The last administration kind of proved it in the converse I would say. The wrap is going to be the lion’s share of the tax cuts go to the wealthy. Not just the amount but also the percentage cuts.
Mnuchin: It’s not the case at all. Any reductions we have in upper income taxes will be offset by less deductions. … There will be no absolute tax cut for the upper class, but any tax cuts we have for the upper class will be offset by less deductions that pay for it.
Kernen: Should I donate to charity then this year?
Mnuchin: There’ll be other deductions that are absolutely limited.
Caruso-Cabrera: How about mortgage debt?
Mnuchin: Again,we’ll allow — we’ll cap mortgage interest but allow some deductibility.
Sorkin: Some of the analysis that suggested the middle class — that certain people, especially I think single family — single household — single parents, they may ultimately pay more. Have you seen those?
Mnuchin: We don’t believe in that analysis. When we work with Congress and go through this, it will be very clear. This is a middle income tax cut and the child care credit is a big aspect of this. This is something we’ve worked on in the campaign and one of the benefits of this is Wilbur and I have worked throughout the campaign with the president-elect and the policy team. So this will be an integrated approach across Commerce and Treasury. So another big area is going to be trade reform where again it cuts across both Commerce and Treasury. We believe in fair trade and we believe that’s going to be a big booth to the economy.
Sorkin: Can you tell us about the situation with Carrier which [we] will learn about later.
Ross: Here we have a trade victory before we’ve even come into office.
Sorkin: What kind of negotiate — do you think a large part of your roles is going to be negotiating with American companies to keep them in the United States and how are they going to be one off deals? What is the Carrier deal actually look like? I think there’s still questions about what —
Caruso-Cabrera: What were they offered to stay?
Mnuchin: First thing I would say is it started with an attitude. Of this administration, this president, this vice president-elect is going to have open communications with business leaders. You can see this started because the president-elect called up United Technologies and said it’s important to keep jobs here. And Wilbur and I will continue that. And again as he said, this is a great first win without us even having to take the job.
Caruso-Cabrera: But the reason those jobs were going to go to Mexico is because they were cheaper. It would help the company stay more competitive. How do you address the underlying issues of why companies want to leave the United States?
Ross: Well, first of all, it’s more complicated than that. Mexico has 44 treaties with other countries that make it very advantageous to do international shipping from Mexico rather than from the United States. Believe it or not, Mexico has better treaties with the rest of the world than the United States does. We’re going to fix that.
Caruso-Cabrera: So that would help address — the initial problem is why do they want to go anyways?
Ross: On a typical car, they save twice as much on tariffs going into Europe out of Mexico as they do going into Mexico to save labor.
Kernen: We say where are you in the world a lot of times and you might be in the U.K. or you might be — you’re all over. If anyone has benefited from free trade, it might be Wilbur Ross and your company. You saw the rhetoric during the campaign. A lot of people said it’s going to pull off a surprise win because we’re going to be a protectionist company not interested in free trade. How do you square that up with your whole career?
Ross: First of all, protectionism is a pejorative term. It’s not really something that’s meaningful. There’s trade, sensible trade, and dumb trade. We’ve been doing a lot of dumb trade.That’s the part that’s going to get fixed.
Kernen: What if we put tariffs on Chinese goods? If we put tariffs on Chinese —
Ross: Everybody talks about tariffs as the first thing. Tariffs are the last thing. Tariffs are part of the negotiation. The real trick is going to be increase American exports. Get rid of some of the tariff and nontariff barriers to American exports.
Kernen: Isn’t some of TPP — isn’t that what it did? Got rid of a lot of tariffs?
Ross: No. Not at all. For one thing, TPP had terrible rules of origin. Rules of origin means can stuff come in from outside the boundaries of the treaty countries? In automotive, the majority of a car could come from outside TPP. Namely could come from China and still get all the benefits of TPP and if it came in from Mexico, all —
Kernen: Is that a bad deal?
Mnuchin: Absolutely. Absolutely and we believe in bilateral negotiations. Have very good deals with lots of countries.
Caruso-Cabrera: Interesting. So this huge regional approach to trade you think is a bad idea. Country to country to country.
Ross:The problem with regional trade agreements is you get picked apart by the first country. Then you negotiate [with] we the second country. You get picked apart. And you go with the third one. You get picked apart again. What has to be put into perspective, we are the big market. We are the world’s biggest importer. We need to treat the other countries as good suppliers. Not as determining the whole show.
Kernen: Well get — We’ve got so much to do, so little time. Can you guys stay until 9? I’m kidding, but keep you as long as we can. I just want to get to Dodd-Frank quickly. A lot of people were hoping [Rep. Jeb] Hensarling. Both those gentlemen probably have much more strident views about Dodd-Frank about what we keep and don’t keep there. Does your nomination make it less likely that that entire bill is gone or will you go softer on reform of Dodd-Frank than those other guys?
Mnuchin: We look forward to working with Hensarling and the other people in Congress on this. One of the good things about Wilbur and I, we have actually been bankers. We were the only two people during the financial crisis that were issued licenses–
Kernen: You’re supposed to whisper that for the last eight years, aren’t you?
Caruso-Cabrera: Badge of honor, you think it is.
Mnuchin: We’ve been in the business of regional banking and we understand what it is to make loans. That’s the engine of growth to small and medium-sized businesses. The number one problem with Dodd-Frank is its way too complicated and cuts back lending. So we want to strip back parts of Dodd-Frank that will be the number one priority on the regulatory side.
Caruso-Cabrera: What about the Volcker Rule?
Ross: Many of the smaller banks have had to get to the point where they now have more compliance people than they have lending offices. That’s crazy.
Sorkin: What about the Volcker Rule and the consumer protection bureau?
Mnuchin: Were going to look at all these things, but the number one problem with the Volcker Rule is it’s too complicated and people don’t know how to interpret it. So we’re going to look at what to do with it as we are with all of Dodd-Frank. The number one priority is going to be make sure that banks lend.