U.S. Treasury Secretary Steven Mnuchin spoke at a Greater Louisville Inc. luncheon on Monday, pitching comprehensive changes to the tax code and a “clean” increase in the nation’s debt ceiling before a deadline next month. Senate Majority Leader Mitch McConnell co-headlined the event, telling guests there is “zero chance” that Congress will allow the country to default on its debt.
The Treasury Department estimates that the federal government would be at risk of defaulting on its debt if Congress does not raise the ceiling by Sept. 29. Some observers say this feat could be made more difficult if legislators attempt to attach partisan policy riders to it, as some conservatives have sought to attach strict measures to decrease federal spending.
Mnuchin said Monday that “we need to raise the debt limit,” and it is his “strong preference that there is a clean raise of the debt limit.”
“As it relates to the debt limit, this is not about spending money,” said Mnuchin. “This is about paying for what we spent. And we cannot put the credit of the United States on the line. We are the reserve currency of the world, we are the major economy of the world, and I look forward to working with Congress.”
Taking questions from a moderator with GLI at the end of the event, McConnell echoed that sentiment, adding that “there is zero chance — no chance — we wont’ raise the debt ceiling. No chance. America is not going to default. And we’ll get the job done in conjunction with the secretary of the Treasury.”
Asked if there should be concern about the amount of America’s debt that is owned by China, Mnuchin that China only owned “about a trillion of the $20 trillion” in American debt, adding that “I don’t think people should be concerned about that at all.”
Mnuchin told the audience that he has met with McConnell and small group of other congressional leaders every week since January to discus comprehensive changes to the tax code, saying that passing such a legislative item is the “highest focus” of President Donald Trump, “because it is critical for economic growth.”
“For far too long we’ve had subpar economic growth,” said Mnuchin. “And the difference between 2 percent GDP and 3 percent GDP is literally trillions and trillions of dollars to the American economy and the government, and this is something we’re very focused on.”
Mnuchin said they Trump administration is committed to simplifying taxes by limiting deductions, which would allow “95 percent of Americans” to “fill out their taxes on a large postcard.” He stressed significant tax cuts for individuals and corporations aimed at “putting money back into people’s pockets” and “making American business competitive, so we can hire more people at good-paying jobs.”
As for the carried interest loophole that allows many investment-fund managers to pay a much-lower tax rate on such income, Mnuchin said that the administration would seek to close that loophole for hedge funds, but suggested keeping it for “many other types of funds that do create jobs, and we want to make sure we don’t discourage investment.”
McConnell said changes to the tax code likely would be revenue neutral, though “there’s some internal debate about that, that we’ll have to sort out for ourselves.” He added that Democrats within the Senate “are not interested in participating” in such legislation, as almost all have ruled out supporting any efforts that decreases the tax rate of the wealthiest Americans.
Mnuchin said changing the tax code would help create growth, which would help low-income families.
Dodd Frank and banking regulations
Citing his experience, Mnuchin said that community banks must be freed from the Dodd Frank regulations to increase their lending.
“For the last eight years I have been a community and regional banker,” said Mnuchin. “And that’s what drives the engine of this economy. The top eight banks control 50 percent of the assets in the U.S. banking system, so what we need to be doing is we need to be growing regional and community banks.”
Mnuchin worked for 17 years at Goldman Sachs, eventually becoming executive vice president, before moving on to own OneWest, which became the largest bank in southern California.
A Trump executive order would allow regulators to get through about 80 percent of the banking reforms they want to do, according to Mnuchin, but the other 20 percent would be “up to Congress.” McConnell said that “it’s going to be tough to get that 20 percent,” as Democrats oppose the effort to repeal the Dodd Frank regulations.
Still gold in Fort Knox?
Mnuchin opened his remarks by saying that he was going to visit Fort Knox, just south of Louisville, that afternoon, to inspect the gold of the Federal Reserve that has been stored there — though today in much smaller quantity — since 1937.
“I have to attest that the gold is part of our national assets, and we have approximately $200 billion of gold at Fort Knox,” said Mnuchin, adding that official government inspections of the gold is quite rare, and it last was counted in 1953. “So I am very much looking forward to the visit. And it is going to be very exciting. I assume the gold is still there.”
Asked by the GLI moderator about “fake news” — a favorite phrase of Mnuchin’s boss, the president — and where he gets his news, McConnell name-dropped Trumps least favorite newspaper, The New York Times, and said he thinks “most news is not fake.”
“I do try to look at a variety of sources every morning before I go to work,” said McConnell. “Everything from the New York Times to off-beat publications that have sort of niche audiences. I try not to fall in love with any particular source.”
The GLI moderator did not ask any questions — which were solicited from the audience — about Trump’s recent controversy in which he appeared to draw a moral equivalence between the white nationalists and neo-Nazis marching in Charlottesville and those who showed up to protest them. McConnell indirectly addressed that controversy last week by saying “there are no good neo-Nazis,” while Mnuchin strongly defended the president’s remarks this weekend after hundreds of his classmates at Yale called on him to resign over Trump’s comments.