(Adds Breakingviews link)
By Dan Burns and Doina Chiacu
WASHINGTON Nov 30 President-elect Donald
Trump's pick to lead the U.S. Treasury, Steven Mnuchin, said on
Wednesday the administration would make tax reform and trade
pact overhauls top priorities as they seek a sustained pace of 3
percent to 4 percent economic growth.
Mnuchin also signaled a desire to remove U.S.
mortgage-finance companies Fannie Mae and Freddie Mac from
government ownership, a move that could have wide-ranging
ramifications for how Americans pay for their homes.
The one-time Goldman Sachs banker, together with Wilbur
Ross, Trump's nominee for commerce secretary, outlined Trump's
economic agenda, including what Mnuchin called the largest tax
overhaul since the Ronald Reagan administration, in an interview
Trump announced the economic team nominations, along with
that of Chicago Cubs co-owner Todd Ricketts as Ross's deputy, in
a statement on Wednesday.
Mnuchin and Ross reinforced the sweeping proposals Trump put
forth in September to simplify the tax code and slash the
corporate tax rate to 15 percent, cutting the top rate for all
businesses from the present 35 percent.
"We think by cutting corporate taxes we'll create huge
economic growth and we'll have huge personal income," Mnuchin
said in the interview.
Tax experts have questioned Trump's assertion that the
proposals would not add to the nation's debt and deficit.
Mnuchin and Ross said lower tax rates would be offset by
reductions in the number of income tax deductions.
"Taxes are way too complicated and people spend way too much
time worrying about ways to get them lower," Mnuchin said.
He also said the administration would cap mortgage interest
deductibility but would allow for some deductions.
In a separate interview on Fox Business Network, Mnuchin
said a major tax reform that includes a large middle income tax
cut would be achieved within 90 days of the Trump presidency.
He also said he expected to reach 3 percent to 4 percent
economic growth in the next couple of years. "I think it's very
achievable," Mnuchin told FBN.
Mnuchin also told FBN mortgage giants Fannie Mae and Freddie
Mac must get out of government ownership. Common shares of both,
which trade on the lightly-regulated Pink Sheets market, shot up
by around 30 percent to their highest levels in more than two
The two companies have operated under Treasury Department
conservatorship since the 2008 financial crisis, when plunging
home prices crippled their finances and threatened to bring down
the U.S. financial system. Repeated efforts since then to reform
the U.S. housing finance system have foundered in Congress.
Trump, throughout his presidential campaign, pledged to
redraw trade deals to win back American jobs. He has threatened
Mexico and China with punitive tariffs that some economists have
warned could spark a trade war that could potentially roll back
decades of liberalization.
Mnuchin and Ross said trade reform would be a top agenda
item in the new administration. Both men criticized regional
trade pacts, saying they favor bilateral agreements with trade
"There's trade, there's sensible trade and there's dumb
trade. We've been doing a lot of dumb trade," Ross said.
Trump has vowed to kill the Trans Pacific Partnership, an
ambitious Asia-Pacific trade pact linking the United States and
Mnuchin said the Treasury and Commerce Departments have
trade enforcement capabilities. With regard to China's foreign
exchange policy, he said on CNBC, "If we determine we need to
label them as a currency manipulator, that's something the
Treasury would do."
Ross told FBN the United States will impose tariffs if
necessary. "There'll be especially tariffs for punitive purposes
for people who dump," he said.
The plans put forth by Mnuchin and Ross mirrored Trump's
stated agenda, said Brad McMillan, chief investment officer for
Commonwealth Financial in Waltham, Massachusetts.
"The color is in how they plan to do it, and here the news
is good," he said. "For Mnuchin, tax reform rather than tax
cuts, offsetting cuts to deductions matching rate reductions,
means that the deficit impact will be smaller than was feared."
"Similarly, for Ross the note that we will be working on
improving trade agreements but with tariffs as a last resort
helps reduce fears of disruption," he said. "Overall, should be
positive for markets by emphasizing the business positive
policies will be pursued in a minimally disruptive way."
Thomas Simons, money market economist with the Jefferies in
New York, characterized the plans as containing "a lot of things
that sound good" but offered few details about how they will be
Mnuchin and Ross also criticized the financial reform
legislation known as Dodd-Frank, passed after the 2007-8
financial crisis, as too complicated and cuts back lending.
Asked on CNBC about Federal Reserve Chair Janet Yellen's
performance, both men said they believed she had done a good
job. That assessment conflicts with Trump's earlier criticism of
Yellen during the campaign.
Ross said he believes it is likely the Fed will raise
interest rates at its meeting in December.
(Reporting by Doina Chiacu and Dan Burns; Additional reporting
by Sinead Carew and Karen Brettell in New York; Editing by Chizu
Nomiyama and Nick Zieminski)