If the establishment has winced, blanched, or looked through its fingers at the Senate confirmation hearing performance of some Trump cabinet nominees, Wilbur Ross, the President-elect’s pick for Commerce Secretary, must have provided relief. The bald billionaire told the Senate Committee on Commerce, Science and Transportation this morning “I am not anti-trade. I am pro-trade,” Ross testified. TPP and NAFTA have flaws, he suggested, but not fatal ones. Ross, 79, is a former longstanding registered Democrat.
If confirmed — which is a certainty — Ross will loom large in the Trump administration’s infrastructure plans. During today’s hearing, Ross made it clear that the plan will not consist only of a large tax deduction infrastructure investors. Instead, it will be an a la carte approach involving a mix of:
• tax incentives
• conventional appropriations
• expanded municipal bond authority
• Public-Private Partnerships
Treasury Nominee Steve Mnuchin
As the principal economic advisor to the president, the Secretary of the Treasury critically influences economic and financial policy. As Secretary, Steven Mnuchin would be responsible for domestic and international financial tax and broader economic policy. As such, he will craft fiscal policy and manage the public debt, controlling the most powerful set of economic levers outside of the Fed.
Mnuchin is a former partner at Goldman Sachs and has no prior government experience. As the head of mortgage lender OneWest, Mnuchin profited handsomely from the housing crisis and his firm oversaw foreclosure practices that have been highlighted in paid media.
OneWest is currently under investigation for unfair lending practices. The nominee has not published any work regarding his views on fiscal or monetary policy.
For many, the first question is what Mnuchin’s plans are for Dodd-Frank, which Trump has promised to “dismantle.” Mnuchin expressed the view last month that federal financial regulatory practices have reduced the flow of capital to small and medium sized businesses because of rules constraining lenders. He says his guiding regulatory principle is to make sure the banks lend as freely as possible. What this means for Dodd-Frank and provisions like the Volcker Rule is a topline question.
The nominee has brushed off his lack of government experience, citing his background in the private sector as sufficient experience. He has said that he saw first hand the negative effects of Dodd-Frank from the private sector and knows how to fix the problem. Mnuchin stood to profit from the financial crisis and he did, mainly on foreclosed homes.
A critical question for the nominee relates to the interagency body created by Dodd-Frank and chaired by the Treasury Secretary — the body that designates financial institutions as systemically important and subject to enhanced regulation: “Do you believe that the Financial Stability Oversight Council (FSOC) should be retained or abolished?
• Tax Reform
Mnuchin has suggested that the incoming administration will propose the largest tax reform since the Reagan administration. He has endorsed reducing the top corporate tax rate from 35 to 15 percent, claiming that these cuts would “create huge economic growth” and “huge personal income.”
He has insisted that the administration’s tax cuts will not reduce upper-income taxes and that the overwhelming bulk of tax relief will go to the middle class. The tax credits that many low and moderate income families earn under the Affordable Care Act would be abolished, ultimately skewing the tax cuts in favor of the wealthiest Americans.
The status of previously published Trump tax plans is uncertain, but per estimates of his latest one, a millionaire would experience a 14 percent tax cut, while middle class families would get not much more than a one percent cut. This outcome is similar to Paul Ryan’s plan –by design — where taxpayers earning more than $1 million would see an 11 percent increase in income after tax while the bottom 80 percent of taxpayers will receive a cut of 0.5 percent.
Tax progressivity is a bedrock principle as old as the Code itself. At a time of increasingly economical inequality, a reasonable question about the nominee’s commitment to the principle of progressivity, seeking his assurance that, as you have stated, taxes on the rich will not decrease and that the middle class will benefit from his eventual tax plan?
• GSE Reform
Mnuchin has said that he will completely privatize Fannie Mae and Freddie Mac “reasonably fast.” Since the USG took Fannie and Freddie over, the agencies have paid $255.8 billion to the Department of Treasury, making the government investment profitable for taxpayers. Privatization will be good news for shareholders, but not necessarily all taxpayers.
This begs the question of transition, if Mnuchin still believes in the full privatization of Fannie Mae and Freddie Mac. What would this mean for their cashflow to the Treasury Department? How will privatization make it easier for borrowers to get mortgages? Will it increase lending?
A question not to ask the nominee unless you want to adjourn the hearing: anything to do with Skull and Bones, the Yale secret society whose members by club tradition must, when asked about the society, immediately leave the room.