tv Washington Ideas Forum Steve Mnuchin CSPAN September 29, 2017 3:19am-3:46am EDT
washington journal live at 7:00 eastern every morning. join the discussion. >> also this morning, i was ernst will talk foreign policy at the center for strategic and international studies live at 9:00 a.m. eastern on c-span two. time, the george washington center for severs security holds its annual conference, looking at sector security policy issues. and will be live on c-span3 c-span.org and streaming on the c-span radio app. -- our look at the republican tax proposal continues with treasury secretary steve mnuchin. he talks about the administration priorities in a sit down with a white house correspondent from cbs news.
>> we're going to get to tax reform because that is a big issue set in motion by the president yesterday. i want to talk about issues also related to the treasury department. it's an important part of what you do what the country is trying to achieve. specifically north korea. david petraeus was just on the stage saying others are discouraged about the trade numbers with china, still trading with north korea. new sanctions were applied last week. what is your level of confidence the sanctions will change the chinese behavior, and can you clarify, because there has been different reporting on this, what exactly chinese banks are and are not doing forward with north korea? sec. mnuchin: sure, first of all, thank you for bringing that up. i think it is an important topic. i did have the opportunity to go with the resident to the human general assembly last week. it really was an incredible experience sitting in the general assembly and listening to his speech. he also signed last week in new york, an executive order which
gives the treasury department the most extensive powers on sanctions that we have ever had. specifically, it allows us out -- us at treasury to sanction any entity that does any trade or facilitates any trade on a go forward basis with north korea. we think they will have a very big impact. i emphasized that is on it going forward aces. mr. garrett: have they been exercised yet? sec. mnuchin: not yet. we've had additional sanctions we have an allowed to do under the executive order, as it relates to financial institutions, it will be on a go forward basis. obviously, we are concerned about historical activity. we are monitoring the go forward
activity and having ongoing discussions. mr. garrett: we think this will have a big impact? the bank of china will or will not continue to do business with north korea? sec. mnuchin: i've had very direct conversations with the governor, i don't want to comment on all the specifics, but i have spoken with the governor. mr. garrett: they will or they won't? sec. mnuchin: they made a representation as to what they will do and won't do. we hope and expect they will follow through. mr. garrett: are you discouraged by the trade numbers? sec. mnuchin: i'm not discouraged by anything. i think this president has taken a very different position. i think for too long this has been an issue that has just continued. you know, we have watched it. i think the president made it very clear that the activities with north korea are unacceptable, threats of hydrogen bombs being tested over the pacific are clearly unacceptable.
and our objective is to denuclearize the peninsula. mr. garrett: i want to ask you before we get to tax reform, about something you said in the springtime about your role in relationship to the u.s. economy. you were asked a question about artificial intelligence and automation. you said, it's not even on my radar screen. the reason i bring this up, a company used to work for, goldman sachs, put out a paper describing artificial intelligence and automation as the apex technology of the 21st century american economy. meaning, it is something that is here and now. have you we evaluated that sense of the importance of automation or artificial intelligence and -- in terms of where the u.s. economy is going and how policy ought to be shaped to deal with it? sec. mnuchin: well, i hate to accuse the fake news of doing things, this is one of the times where my quote was misrepresented.
they didn't say the entire context. what i said was technology is having a very big impact in the workforce. i specifically think robotics, and i commented at the time that robotics are an important part of the workforce. and quite frankly, i think that is a positive thing. it's taking over jobs that are not necessarily jobs that humans need to do. what i was referring to was artificial intelligence, and i specifically referenced r2-d2, for the "star wars" fans out there. okay, i said it will be a long time before your artificial -- before pure artificial intelligence takes over. that was not on our radar screen. technology is here and having a very big impact. mr. garrett: how does what the president introduced yesterday and what congressional republicans have mostly embraced have to do with technology?
sec. mnuchin: i think what yesterday was about and tax reform, it is important we make american business competitive. right now, independent technology -- by the way, we have been a leader and technology for long time, and advances. but independent of that, we have one of the highest business tax rates in the world. we tax on worldwide income, which virtually no one else does. we have a concept of deferral. it is no surprise there is trillions of dollars offshore. what the president talked about yesterday, he is focused on economic growth. to get economic growth, we need to have business tax reform for corporate, middle income tax cuts and simplification. mr. garrett: it has been said that the optimistic appraisals of the impact of your tax reform plan could bring domestic growth gdp to 6%. are you that optimistic?
sec. mnuchin: that is optimistic. again, what we've scored it to is 2.9% gdp over 10 years. which is scaling up to 3%. we think that is doable. we think we can do higher, but if we get to 3%, that is $2 trillion of additional revenues, $10 trillion of economic activity. and not only will the tax plan pay for itself, but it will pay down debt. mr. garrett: and that paid for itself comes from the projected economic growth? that is about $2 trillion short even when you look at the a force in the details released so far. sec. mnuchin: i don't think those numbers are right. i think what we are trying to
achieve is $1.5 trillion static. i would describe that as a baseline. there are about $500 billion between baseline and policy. to the extent that we have a policy and are rolling it over every year. that is $1 trillion versus policy. if we get those $2 trillion, we to $1 trillion and positive paying down the debt. mr. garrett: as you approach this audience and the country generally on this issue, your position is, don't worry about the deficit, there will be no deficit implications if the tax reform plan is signed into law. sec. mnuchin: i would say differently. you should worry about the deficit. we've gone from $10 trillion to $20 trillion of debt. we need to create economic growth and we think our projections are very reasonable. i think 2.9% is a very reasonable number two project this too. mr. garrett: the statutory corporate tax rate is 35%, but there are many studies, research service, cbo, that said the
effective average corporate tax rate is about 24%. so cutting it to 20%, how much difference would that make and is it worth giving up the revenue for a 4% differential? sec. mnuchin: i think that's your argument for exactly why we need tax reform and tax cuts. people spend so much time trying to figure out how to get around, whether it's special interests or other taxing, get around the taxes. this is about broadening the tax base and making it fairer. [applause] sec. mnuchin: thank you. mr. garrett: when you talk about rates, 12%, 25%, 35%, if i
understand correctly, you still don't have income brackets assigned to the rates. why not? sec. mnuchin: we have done a lot of work on this. i think the point we are trying to make is we spent a lot of time on this. we cannot have six people design the entire tax code. i think we have done a great job, the house and senate were far apart when we started. we have everybody on the same page. we have talked about brackets. but as opposed to releasing them, we are going to work with the committees, they have the right to have input, they actually write the bills. and we're working on that. but let me just comment on the 12% rate. when you raise the standard deduction, effectively the 10% rate disappears and people who were paying 10% will pay zero. again, this is about grading -- about creating middle income tax relief and simplification. mr. garrett: a top economic advisor within the white house was on cnbc. he said the president is open to a forced tax rate.
maybe just under the current 39.5% is that true? sec. mnuchin: we did put in the release that we have designed the rates. we said the committees will contemplate a fourth rate. if we do that, it will be if we need additional money for middle-class reforms. again, there's people who have different views on whether we should do that or should not do that. the president is committed this is not about a tax cut for the rich. i can tell you in the high tax states, i have had the pleasure of living in new york and california, i can my taxes are -- i can tell you my taxes are going up in any event, not down. getting rid of deductions is worth over five percentage points on high tax states. mr. garrett: can you say to this audience and the country that when this proposal reaches the presidents desk, one of his must have's is a distributional analysis that shows the wealthy, even if you win this are human, estate tax will be eliminated, distributional tables will reveal the top 1% will not get a tax cut?
sec. mnuchin: again, it's been the president's objective from the beginning, i think you know this has been dubbed the mnuchin rule. it's not about tax cuts for the wealthy. we're talking about income taxes. obviously if we change the estate tax, that has a different distributional. but it's the president's objective that income taxes will not be a cut on the wealthy. different states have different impacts on this. but that is our objective. mr. garrett: let's talk about different states. you mentioned california and new york, they are one of several higher tax states. one of the acronyms the gets kicked around is salt. it proposes to eliminate federal tax deduction for what any income earner pays in state and local taxes. there are 52 congressional republicans representing districts that according to irs data, those districts paid higher the average state and
local tax, about $3800 per year. peter king is one of them and he said he cannot vote for any tax reform proposal that eliminates state and local taxes. if you lose those 52, or a large percentage of them, how do you pass this? sec. mnuchin: first of all, don't you love that politicians, we have our own language with acronyms? salt, i mean, i think the average american if you start talking about salt, they would think you were talking about dinnertime. it is now refer to as state and local taxes. this does not help me, this hurts me. okay? i think longer-term, getting the federal government out of subsidizing states is the right thing to do. it's just not fair. the federal government should just not be in the business of subsidizing states. this is something that started
in the house plan and we have agreed with. honestly people in california, new york, connecticut and other places, we understand the impact. that's why as we look at the rates, you'd again, even at 35%, they are not getting a tax break. it's something we will work with congress on. mr. garrett: is it negotiable? sec. mnuchin: this is a pass-fail exercise. we want to get tax reform done. the president's number one issue, which is not negotiable, is a 21% tax plan. we have a plan. this is a plan that has had a lot of support from congress and we look forward to working with the committees. mr. garrett: to get tax reform, you need reconciliation mechanism come you have to pass a budget resolution. freedom caucus members would like to hundred billion dollars in entitlement cuts as part of
the resolution. can you live with that? sec. mnuchin: we do need a budget. i believe if we get a tax plan people want to support in congress, we will get a budget that goes along with that. one will lead to the other. and they will go through together, but obviously they are connected. mr. garrett: can i get you to be one will lead to the other. more specific on your orientation to this idea? do you need to freedom caucus votes on the resolution about the fixed entitlement cuts as part of the equation? sec. mnuchin: again, i've had a lot of conversations with them. i have a lot of respect for them. this is a congressional issue. we will work with them as budgets are developed in the house and senate. mr. garrett: as a conceptual idea, are you in favor of getting rid of the debt ceiling as a matter of law and practice on capitol hill? i asked the president about this two weeks ago in he was open to the idea. sec. mnuchin: exactly.
i think as you know, there are certain things i came with a lot of experience with in this job. there are certain things i didn't. i have heard a lot about the debt ceiling, but until you go through a debt ceiling, it is a little bit different. i was operating the government like a piggy bank, i would be sitting there with my team looking at our cash numbers and managing the cash and watching what came in and out, and we were operating with way too little cash. so, the first thing is, i was very happy the debt ceiling got raised. the first thing i did that day was raise an extra $20 billion for same-day settlement increase -- increase our cash. that's how concerned i was. i view is congress has every right, they appropriate the money, they get to decide how we spend it. but when we agree to spend the money, we need to agree to be able to pay for it. so whether we get rid of it or
whether we approve a debt ceiling simultaneous with spending, i think in one form or another, we need to figure out over time how to fix the system. because at the end of the day, the republicans and democrats agree we are not going to not pay our government debt. it is absolutely inconceivable. mr. garrett: share with us some of the internal conversations. this is a live issue. there are those in the administration i have talked to, they wonder why anyone might give up the leverage that comes with the debt ceiling vote. others have said, you can find that leverage in other ways. it really creates unnecessary ripples of anxiety, not just in the domestic economy that international appraisal of the united states. where do you come out on that? sec. mnuchin: this is something we want to figure out on a longer-term basis. the number one issue was making sure the debt ceiling got race.
-- raised. i am happy it not only got raised to the summer it, but the treasury superpowers got refilled. that takes us into next year. mr. garrett: how far into next year? sec. mnuchin: i'm comfortable we can fund the government through january. i don't have enough visibility through that. that we will not be in the position on december 8 we will default. i am hoping as part of the december 8 negotiations, and it is critical -- the president could have done a longer deal that wanted to make sure we had military funding. that is an important part of the december 8 negotiations. and i'm hopeful the debt ceiling will be extended. mr. garrett: back to your appraisal of future productions on gdp growth, 2.9%. if we're pretty much there now, what's so exciting and dynamic about tax reform if we're going to end up at 2.9% or 3.2%?
isn't the idea to get much higher than that? sec. mnuchin: i never said we would it up at 2.9% or 3%. i said i am very comfortable we can get to higher than 3% sustained gdp growth. i think we are using a very conservative numbers in the hay -- in the pay fors. and as you said, there has been a lot of expectation. we have tax reform, we will get regulatory relief. in the economy, we've had numbers that have looked a very good quicker than we expected. people are reacting to the anticipation of all of this economic changes. mr. garrett: let me throw the two r's at you. retroactive to the end of this year? yes or no? on tax reform?
subject to debate? sec. mnuchin: correct. mr. garrett: revenue neutral. sec. mnuchin: on a dynamic basis, not only will it be revenue neutral, revenue positive. mr. garrett: for our audience, help them understand the difference between static and dynamic. sec. mnuchin: static means no change in activity. mr. garrett: people don't change their behavior because they have a different tax bracket. sec. mnuchin: no change. let's take the corporate rate it -- rate. mr. garrett: or expensing. sec. mnuchin: we will come back to that and it appeared companies spend time trying to keep money offshore. okay? we think this will bring back to trillions of dollars, the money will be invested here combined with expensing, it will create enormous capital investment.
it is going to create enormous jobs and enormous revenues. by lowering the tax rate, we can actually get a lot more in revenues. the people spend more time in figuring out how to get around taxes when they are 35% than 20%. mr. garrett: the dynamic part is, assuming changes in behavior, more economic growth and therefore larger -- sec. mnuchin: a bigger pie, bigger pie. mr. garrett: there been issues raised about your use of air. the president said he was unhappy with the situation. has he or the chief of staff john kelly issued a directive to be more specific with cabinet secretaries about what is or is not permissible and what he wants cabinet secretaries to do when it comes to travel by air? sec. mnuchin: again, i can only comment on the situation as it relates to me. i cannot comment on other secretaries because i am not involved in that. i can tell you there has been no directives as it relates to me.
i look forward, we are going to have an inspector general audit. and i'm very comfortable we follow the proper procedures. i've never had the government pay for any of my personal travel, and the limited number of times we've used milair, it was because i needed to have security communications. sanctions and what i'm doing are an important part of the job. or there have been times when we could not get to places when we needed to be there. it is expensive and i understand why taxpayers are concerned about these issues. again, i am very comfortable and i look forward to the ig report reviewing our travel. mr. garrett: as a general matter, what do you think is the future of paper currency in general? how much do you think that will be part of the way americans transact the business? much of my personal transactions are done electronically. just curious about that.
and what's the status -- alexander hamilton, harriet tubman, andrew jackson? [laughter] sec. mnuchin: sure. i think the long-term trends will be to less physical cash. and i think even you know, we are very happy with the irs, the number of electronic returns, i think the number of payments we make to social security holders and others through ach electronically as opposed to physical checks -- i think the trend toward how we can move away from paper checks and hard currency, i think there is a lot of efficiencies in the economy. i think i am surprised, as
others are, in how there still is big demand for physical cash. you look at the numbers, and even though we have many more electronic transactions, the cash in circulation, the physical cash in circulation, has not declined at the rates we may have expected. and i can comment, i'm integerally involved in all of the hurricane issues, for the last two days, we been involved in trying to figure out how we can get major amounts of cash to puerto rico. we have made to giant cash shipments. in times like this, we want to make sure people have cash and the economy can continue to function. so, cash for the foreseeable future, physical cash is not going away. mr. garrett: before we let you go, harriet tubman and andrew jackson. on the $20 bill. sec. mnuchin: the number one
reason why we look at making currency changes is because of counterfeiting. we look at changes, there's three or four different parts, some of which are public and some of which are not, in the currencies. that is what i am focused on at the moment. any change won't be -- i think it is 2028. they are very far in the future. unfocused at the moment on how to protect the currency -- i am focused at the moment of how to protect the currency and the technology changes to it. mr. garrett: give it up for treasury secretary steven mnuchin. [applause] for as long as i live, i will never forget, that in no other country in the world, is my story possible. it has made me the most unconventional of candidates, but is the story that is seared into my genetic makeup, the idea
that this nation is more than the sum of its parts. that without the many, we are truly one. >> for the past 30 years, our video library has been the source for politics and public affairs. whether it happened 30 years ago or 30 minutes ago, find it in c-span's library at www.c-span.org. c-span, where history unfolds daily. >> in the news, rice took jets -- took took just to europe for over $500,000. that would not include the cost of the military flights. earlier today on the health floor, three congressman introduce a bill calling for the secretary to resn.