By Rebecca Ballhaus and Nick Timiraos
Treasury Secretary Steven Mnuchin laid out ambitious goals to
secure a U.S. tax-code overhaul by August and to deliver economic
growth at rates not seen in more than a decade.
Mr. Mnuchin, in his first interview since his confirmation last
week as Treasury secretary, said slower economic growth since the
financial crisis had primarily been an anomaly and a result of
Obama administration policies that can be reversed. He said the
Trump administration is aiming for a sustained 3% or higher annual
growth rate, a projection not widely shared by other
forecasters.
"We think it's critical that we get back to more normalized
economic growth. More normalized economic growth is 3% or higher,"
said Mr. Mnuchin.
Many economists have warned that the U.S. faces slower economic
growth because the labor force is expanding less briskly than in
the past as baby boomers retire. The economy has grown about 2% on
average over the past decade, and other wealthy economies facing
similar demographic challenges as the U.S. have seen slower growth
rates.
Many economists believe sustained growth at more than 3%
annually will be difficult. The Federal Reserve projects a long-run
annual growth rate of just 1.8%.
Stronger growth would make it easier for the Trump
administration to balance competing goals of cutting taxes and
boosting spending on the military and infrastructure without
sending deficits much higher. The new administration is working on
a budget blueprint due out next month that will be a first step
toward reconciling its objectives.
"We will have our own set of financial projections," he
said.
Mr. Mnuchin said the administration was working with House and
Senate Republicans to smooth over differences among them on tax
policy, with the aim of passing major legislation before Congress
leaves for its August recess. He added, "that's an ambitious
timeline. It could slip to later in the year."
In his first week on the job, Mr. Mnuchin has spoken with around
10 foreign counterparts and other leaders, including International
Monetary Fund Director Christine Lagarde. He also has met with Mel
Watt, the director of the Federal Housing Finance Agency, the
independent regulator of mortgage companies Fannie Mae and Freddie
Mac, which are under the effective control of that agency and the
U.S. Treasury as a result of their 2008 bailouts.
Mr. Mnuchin, whose confirmation process was the longest for a
Treasury secretary in U.S. history, brought a handful of advisers
to the agency with him, but it will likely be months before other
senior positions that require Senate confirmation are filled. The
White House hasn't nominated anyone for other posts at the
department that require Senate approval.
The secretary has been in close contact with National Economic
Council director Gary Cohn, his former colleague at Goldman Sachs
Group Inc., who emerged as a powerful economic policy maker while
Mr. Mnuchin awaited confirmation. The two men have a close
relationship, a Treasury official said.
One big question is whether the Trump administration will go
along with House Republican plans to make a tax overhaul revenue
neutral -- meaning lower tax rates won't add to the deficit. Mr.
Mnuchin wouldn't discuss the administration's view on that question
and instead pointed to stronger economic growth as an engine that
will reduce the urgency for major trade-offs in any tax bill.
The House GOP plan doesn't count solely on growth. It also
features limited deductions and a border-adjustment provision that
taxes imports and removes taxes from U.S. exports. The plan is
projected to generate about $1 trillion over a decade.
The border adjustment provision has run into criticism from
large retailers and other importers. U.S. Senators have piled on,
too, leaving the idea in trouble without a major presidential push
that hasn't happened and might never come.
Mr. Mnuchin said the administration is "looking seriously" at
the House plan that includes border adjustment and was well aware
of concerns raised by specific industries. The Treasury Department
had its own concerns, he added, "about what the impact may be on
the dollar" from a border-adjusted tax.
His comments underscored the challenge the new administration
and congressional Republicans face reconciling competing
objectives.
With the House plan in potential trouble, a Senate plan
nonexistent and the Trump plan incomplete, the GOP's tax agenda is
in search of a guidepost at a crucial moment. Mr. Mnuchin called
for a combined plan that would address developing fractures in the
party over tax policy.
As Treasury secretary, Mr. Mnuchin also takes on the role as the
Trump administration's leading voice on U.S. currency policy,
meaning his every word on the dollar will be closely followed in
financial markets.
Mr. Trump has expressed frustration that other countries -- most
notably China -- have used weak currency policies to boost exports.
The comments during his campaign and since his election carried
with them an implication that the new administration might favor a
weaker currency to support the U.S. trade position.
But Mr. Mnuchin avoided taking confrontational positions on the
dollar. He said the strong U.S. dollar is a reflection of
confidence in the U.S. economy and its performance compared with
the rest of the world and was a "good thing" in the long run. The
comments echoed remarks Mr. Mnuchin made in a confirmation hearing
last month.
The dollar has appreciated by 23% over the past three years and
added to those gains since the November election.
"I think the strength of the dollar has a lot to do with kind of
where our economy is relative to the rest of the world, and that
the dollar continues to be the leading currency in the world, the
leading reserve currency and a reflection of the confidence that
people have in the U.S. economy," Mr. Mnuchin said.
The past several administrations have for the most part signaled
support for a strong dollar, even though at times an appreciation
of the currency has hurt exports.
Mr. Mnuchin demurred when asked about China's currency and said
he looked forward to "healthy bilateral relations" with the world's
second- largest economy.
"There's trade issues that will make sense to look at, and I
think there's investment issues that will make sense to look at,"
he said. "There are many things that we will need to collaborate
on."
During the campaign, Mr. Trump repeatedly promised to brand
China as a currency manipulator, but over the past 18 months, China
has taken steps to bolster its currency. The Obama administration
said that was a sign Beijing had moved away from seeking an unfair
trading advantage by keeping the yuan undervalued.
Mr. Mnuchin said those were two separate issues. "One is the
issue of currency manipulation, and then one is the issue of
whether there's unfair trading advantages," he said Wednesday.
"They may or may not be related."
--Richard Rubin contributed to this article.
Write to Rebecca Ballhaus at Rebecca.Ballhaus@wsj.com and Nick
Timiraos at nick.timiraos@wsj.com
(END) Dow Jones Newswires
February 22, 2017 20:20 ET (01:20 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.