“The president and I believe we should do more stimulus," Mnuchin said on “Fox News Sunday." "We have about 7 and a half million jobs we need to get back until we’re back to where we were, and we want to help small businesses. We want to help businesses that are particularly impacted by this, and we’ll continue to work on proposed new legislation."
Full transcript below:
MARIA BARTIROMO, FOX BUSINESS ANCHOR: Joining me right now over the phone is Treasury Sec. Steven Mnuchin. Mr. Secretary, it's always a pleasure. Thanks very much for being here.
STEVEN MNUCHIN, SECRETARY, U.S. TREASURY (via telephone): Maria, great to be with you as well.
BARTIROMO: Of course, the president did sign several executive orders to make sure the stimulus keeps on flowing for the American people. But can you tell us where the disagreement was with the Democrats and why a deal couldn’t get done last week?
MNUCHIN: Well, Maria, you know, Mark Meadows and I left the meeting on Friday and it was clear to us that Nancy Pelosi and Chuck Schumer were just not willing to compromise. And as a result of that, we walked out.
We called the president and said look, it's time for you to move forward with executive action. And those executive actions, they're very important. It's not everything we can do with legislation but he guaranteed that there's unemployment benefits that will go to the states.
But, you know, my view on a negotiation is you agree on the things that you can agree on, pass legislation that's good for the American public, and then come back always for another bill.
And I think the Democrats are very focused on the politics. Perhaps they think that any deal is good for the president and that's why they don’t want to do it.
But we agreed on money for schools, money for child care, money for small businesses, second payments on the PPP for businesses that have been particularly hard-hit. More money for vaccines, hospitals. We even agreed to state and local aid, just not the ridiculous trillion dollars that they wanted.
BARTIROMO: So what about the aid to cities and states, the localities -- which, of course, the Democrats want money to go specifically to cities and states? I know the president has talked about not wanting to reward certain cities that have had bad policies for years.
Where are you on the money toward states?
MNUCHIN: Well, Maria, you know, the president understands the impact on state and local governments.
And let me first start with there's clearly been costs that the state and local governments have incurred as a result of COVID and that's been our first priority.
So in the first bill, we gave them $150 billion. That's more than enough money for the majority of the states. We gave them additional flexibility so that they could use that money for -- to pay firefighters, policemen, first responders, medical workers, so that they didn’t have to lay off those workers.
And most of that money has not been spent. Most of the states are sitting on a lot of that money. They want to use it for lost revenues.
As part of our compromised proposal to the Democrats, we've said OK, we'll create flexibility. You can't use that money to bail out pensions but we'll let you use the historical money for lost revenues, and we'll put another $150 billion on the table. And that's an awful lot of money. That's $300 billion to state and local.
We want to make sure that also, that money gets down to cities and counties that are hard-hit and it's not just held by the governors. And that will have a very good economic impact.
And I think the issue is the way the Democrats come up with this trillion dollars is they look at the next two years and they project losses. They don’t think the economy is going to open up -- we do. And they look at some of their most problematic states, which had issues before all of this.
BARTIROMO: Right, right, sure.
What about cutting taxes? The president allowing businesses to defer payroll taxes through the end of the year with those executive orders over the weekend. He did float making those cuts permanent.
I want to ask you about capital gains.
Here's the president. Watch this.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We're looking very seriously at a capital gains tax cut and also, an income tax cut for middle-income families. I signed directives to give a payroll tax holiday with the understanding that after the election, on the assumption that it would be victorious for an administration that's done a great job, we will be ending that tax.
BARTIROMO: Secretary, what about that? Is the administration looking to implement further tax cuts ahead of the election?
MNUCHIN: Well, the president liked -- would like to do capital gains tax cuts and we do need legislation to do what we want on that front.
But if you go back and you look at the Taxpayer Relief Act of 1997, it reduced capital gains from what was 33 percent to 20 percent. It stimulated the economy tremendously. You then had, in 2001, a further reduction to 18 percent. And in 2003, a further reduction to 15 percent, including qualified deductions.
And that stimulated tremendous investment in our economy and that's what we need now looking at COVID. So I think for the next few years while we recover, we should reduce those capital gains.
And I would just add that in 2003, Biden voted against the reduction of 20 percent. So again, you see two very different economic policies. One is tax more and hurt the economy; one is create selective tax cuts, regulatory relief, and an economic agenda of trade that will stimulate the economy.
BARTIROMO: Right. Well, Vice President Joe Biden has said that he is looking to raise taxes on certain groups.
I want to ask you about the payroll tax cut because the president wants employers to stop collecting that 6.2 percent tax that is the employee's share of Social Security taxes for many workers, beginning on September one. But there is some worry about the cost of this. Employers are talking about facing a series of costs, uncertainties, and headaches.
How does that money get generated, if not through this tax cut? Where does the money come from to replace it?
MNUCHIN: Well, we're going -- we're going to create a level of certainty for employers that want to participate. We can't force people to participate but I think many small businesses will do this and pass on the benefits.
I think, you know, the president would like to do a payroll tax cut. So he'll go back to Congress when he wins the election and ask Congress to have this money forgiven and have the Social Security Trust Fund fully topped up so that in no way does this impact Social Security.
BARTIROMO: Secretary, I know that while you are negotiating with Congress you are also talking with business and having a great window into what's going on.
We just spoke with Cornerstone Macro's Nancy Lazar, who is raising estimates for the second half of the year and is talking about capital expenditures increasing.
How would you assess things right now, Secretary?
MNUCHIN: Well, Maria, you just have to put this in perspective because this is unlike any other economic situation we've ever had. And this is because as a result of COVID, we literally shut down the entire economy.
It's like taking a water faucet and turning it off and obviously when that occurs, it has an enormous economic impact. We've never shut down, voluntarily, the entire economy before. So there's no question that the numbers in the second quarter were dreadful.
And as we know, safely reopen the economy, you see the numbers increase. And that's why you've seen we have brought back a lot of jobs. The economic policies are working. The previous legislation is working, helping small businesses, helping employers.
And, you know, we're making a lot of progress on vaccines and virals. I think people are very encouraged by that.
And as you see the economy reopen, I think you're going to see very good numbers between now and the end of the year.
Now, having said that, there are things that we'd still like to do with additional legislation. And if the Democrats can be reasonable and put politics aside, this will be good for American workers and the American economy and we'll continue this expansion.
And the president wants to make sure every single person that lost their job because of COVID gets it back. Let me just remind you, the president had the best economy we've ever had when we started this before COVID.
BARTIROMO: Yes. And as a result of this shutdown the administration, as well as the Federal Reserve, have thrown in enormous amounts of stimulus at this problem. It is expensive.
So what do your colleagues in the Congress have to say about the debt? We're talking about a $3 trillion plan versus what you're hoping to be a little more than $1 trillion. When does debt become a problem to worry about, Secretary?
MNUCHIN: Well, Maria, you know, we've already put $3 trillion into the economy. A lot of it has not made its way in, so it'll continue to put money in. With a little over another trillion dollars, we will have injected 20 percent of our GDP back into the economy, and that's really an extraordinary number.
And my point to the Democrats and the Republicans are let's do this -- this will be the fifth bill. We can always come back later in the year or in January and do a sixth bill. We don’t need to do everything at once.
Now, the Democrats started at $3.5 trillion, which had everything in there including lots of stuff that was nothing to do with COVID. They increased their offer by another couple of hundred billion dollars, so I actually think they got closer to $4 trillion. And now, they've offered to take the trillion dollars off, so I can't quite figure out whether we're at $2.5 trillion or $3 trillion.
But our view is let's spend a little over a trillion dollars on areas of the economy that are going to be very impactful now that we can agree on. And if we need to do more we'll come back and do more and work together.
But now is the time to have bipartisan support to help our kids go to school safely, to help our small businesses, to help our hospitals. To help rental assistance, airports, broadband, vaccines. These are all things that are critical to the American public. And as opposed to bickering about whether there's enough money, let's get money to work now.
BARTIROMO: Do you believe you will come up with an agreement over the near-term, Secretary?
MNUCHIN: Maria, I can't -- I can't speculate. If the Democrats are willing to be reasonable --
BARTIROMO: You can't say -- you can't say. I understand, sure.
MNUCHIN: -- there is a compromise. If the Democrats are focused on politics --
MNUCHIN: -- and don’t want to do anything that's going to succeed for the president, there won't be a deal.
BARTIROMO: How did you come up with the $200, Secretary? I know that you wanted it to be 70 percent and the states take care of 50 percent of any wages lost. How did you come up with that unemployment number which, of course, was at $600 a week?
MNUCHIN: Well, Maria, let me just put this in perspective.
During the financial crisis under Obama, the federal government had a $25.00 top-up.
So when we sat down and negotiated with the Democrats -- we shut down the entire economy so we knew that unemployment was going to be a problem. And we thought this was going to be for a short period of time was that while the water faucet was closed. And the $600 was an average number across the entire country.
And we knew in certain places it would be too high and certain places it would be too low and we contemplated doing $400, $600, $800 in different parts of the country. We thought that that wouldn’t be fair because it would impact different places differently from the federal government. But we knew that was a short-term issue.
Now, when we came back with the $200, the $200 is about 75 percent of wage replacement for the majority of the people. But the president agreed to go higher. We thought a very fair compromise was $400 and that's why the president put that in the executive action and that's why we're moving forward with that. And, you know, $200, $400, $600 -- $400 is a compromise.
So instead of the Democrats basically saying don’t give anybody anything unless we can get exactly what we want, the president wants to move forward with a very fair proposal.
BARTIROMO: All right, we will be watching. Thanks for your leadership, Secretary. It's good to have you this morning. Thank you, sir.
MNUCHIN: Thank you, Maria.
BARTIROMO: I'll see you soon. Secretary Steven Mnuchin there.