When: Today, Thursday, July 23
Where: CNBC's "Squawk Box"
The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Treasury Secretary Steven Mnuchin on CNBC's "Squawk Box" (M-F, 6AM – 9AM ET) today, Thursday, July 23rd. Following are links to video of the interview on CNBC.com: https://www.cnbc.com/video/2020/07/23/mnuchin-gop-jobless-benefits-plan-will-be-based-on-70-percent-wage-replacement.html and https://www.cnbc.com/video/2020/07/23/mnuchin-trump-wont-bailout-mismanaged-states-such-as-illinois-or-new-york.html.
All references must be sourced to CNBC.
JOE KERNEN: We are going to Secretary Mnuchin. Senate Republicans say they've reached an agreement with the White House on the next coronavirus stimulus bill likely at least a trillion dollars in relief joining us now to talk about the aid package, because we Secretary Stephen minuchin a lot happened yesterday. Can you just fill us in on exactly what we know is in the built at this point. Secretary.
SECRETARY MNUCHIN: Good. Well good morning and it's good to be with you but let me just be clear on the President's priority in the bill and as you know this is a negotiation so we need both Republicans and Democrats support, but we are on the same page with the Republicans. We've had very good meetings over the last few days, the President's priority is about kids, and jobs. We need to be able to get kids back to school safely. The Democrats had 100 billion dollars in their heroes act, we've we've increased that to 105 billion, some of that money will be dependent on schools reopening and money used so that it can safely reopen his schools and jobs are going to open we need to make sure we don't have frivolous lawsuits. And I think as you know we have the enhanced unemployment insurance that's expiring next week so that's a priority we need to respond to that. As we've said before, we're not gonna continue with in its current form because we're not going to pay people more money to stay at home than work but we want to make sure that the people that are out there that can't find jobs do get a reasonable wage replacement so it will be based on approximately 70% wage replacement. And we're also going to have a lot of tax credits to incentivize companies to hire people. And then finally, just let me say you know there's a lot of bipartisan support for extending the PPP I've had conversations with Cardin and Rubio, and we want to have second checks for companies whose revenues are down, 50% or more and need more money small businesses to get people back to work.
KERNEN: The 16 billion for new funding for testing and the White House's okay with that now is that done.
MNUCHIN: Well there's actually a 25 billion of total for testing which we've agreed on. Because there's 9 billion that's leftover and there's a 16 billion top up so there's 25 billion available, and we're gonna make sure that all the states that need to test people particularly nursing home schools and other things, where people feel comfortable with lots of testing we're going to make sure we have that
KERNEN: we hear again and again and again about that there's remaining residual tension between the White House and the President and Senate Republicans on the payroll tax provisions tax cuts, where is that,
MNUCHIN: well let me be clear we think the payroll tax cut is a very good pro growth policy, but the President's focus is he wants to get money into people's pockets now, because we need to reopen the economy. One of the issues I think you know about the payroll tax cut is people get that money over time. So the President's preference is to make sure that we send out Direct Payments quickly so that in August, people get more money, there's no question this worked before retail sales was up year over year 1% people went out and spent that money in small businesses, and that's having a big impact in the economy so as I said, it's all about getting money now for kids and jobs.
KERNEN: sounds like that it's not going to be in the bill.
MNUCHIN: It won't be in the base bill but again it as we roll out new things, and again this is cares 4.0 there could be cares 5.0.
KERNEN: There is news, I guess that came up separately from what you know some of the things you were trying that now is Mitch McConnell on board with this are there really a handful of bills as you were just alluding to, I guess maybe a four or five and six or something is that the way it's going to progress.
MNUCHIN: Well the process is, there are individual bills for all these different programs. Mark Meadows and I were working late last night with Mitch and and his staff. We're actually speaking to them as soon as I get off the show this morning so we just need to make sure we see all the final agreements in the final language. Mark and I met with the appropriators last night and reached an agreement on the appropriators numbers but as you know there's there's a lot of text that goes back and forth.
KERNEN: We're at a trillion, I guess, are we above a trillion will will end up above a trillion and that's up that's too much for some Republicans, even at that point and way too little for for a lot of Democrats.
MNUCHIN: Well, let me just put this in perspective, you know, we are where we are because Congress the Senate and the house reacted quickly and clearly saved major parts of our economy that would have been devastated otherwise. We've, we have $3 trillion. We've only put about a trillion and 6 actually ends with a lot of money left to go. We're focused on putting another trillion in quickly. That'll be cares,4.0 if we got to come back for cares 5.0 for more money, the President will consider that at the time he's always said he's focused on the American workers and the American public and what's critical now to reopen the economy safely
KERNEN: and how much for states now and can you go into the actual liability. What is the language going to be what's gonna look like. Exactly.
MNUCHIN: Well the let the layman's language is you can't have frivolous lawsuits and I think ordinary people understand that so you know this isn't about funding the trial lawyers, you know without me going through all the technical language which is, is, is complicated I mean that the basic thing is if companies and universities and schools, act in good faith and do all the right things they shouldn't have frivolous lawsuits if someone acts, obviously inappropriately that's a different situation. And I think people understand that you can't have universities not open because they're afraid of being sued. That just hurts our students.
KERNEN: And the other part question it really wasn't necessarily related but something to talk about. And where is it going to be for states and is that gonna satisfied democrats and what they're looking for.
MNUCHIN: Well I think you know the Democrats won 900 billion and if we gave them 900 billion they probably asked for a trillion and a half so I'm not sure we'll ever completely satisfy them, but on the state issue the president is not gonna bail out Chicago in New York and other states that prior to the coronavirus were mismanaged. I think you know we allocated 150 billion, probably you know 30 to 50% of that money has has been used, we gave a lot of flexibility. We're going to have the Kennedy bill which basically says the states that have the money can use the money for lost revenues, that's going to take care of virtually every single state. I think that's a very fair compromise i think you know there's a lot of Republicans who feel like, and I agree with this that states, you know, have their own ability to tax that it's unfair for states like Florida to be bailing out states like New York. But having said that, you know, kind of, we're gonna go with a compromise solution which is the Kennedy bill.
KERNEN: Okay, Melissa.
MELISSA LEE: Mr. Secretary, you've already thought about the next possible CARES act and so I'm wondering if you've also thought about at what point aid stops. And I know we might be early on this, but there are some thinking that there are parts of the economy that will never come back to full force, to pre-COVID levels, simply because of the changes that have happened in the economy and that those businesses should be allowed to fail, should file for bankruptcy. When does that process in your mind start? When do we start thinking about that?
MNUCHIN: Well that process has already started. I mean you've seen companies like Brooks Brothers, you know, obviously it's a retail company. Retail has had issues. You see companies that were over levered going into this and the bankruptcy process is a fair process, but on the other hand, there's lots of small businesses that closed because the federal government told them to close. It was no fault of their own and those are the businesses we should be helping, and that's what we're going to do. And as I said, you know, we're going to make sure where we have bipartisan support, we can get money to people quickly and the PPP is a perfect example. Now, it's got to be much more targeted, there were clearly areas of the PPP that, you know, people shouldn't have gotten money and they're going to go through proper reviews. But a lot of small businesses that their revenues are down 50% or more, it's because of government actions.
KERNEN: Mr. Secretary, what have you thought of – I'm going to throw you a softball here, or at least give you a chance to comment. Not a softball, but to comment on Vice President Biden's proposals for the economy. Any merit to any of his ideas? The trillions are flowing it looks like in certain proposals that on top of the trillions we've already spent.
MNUCHIN: Well, I think, you know, there's a very different economic program between myself and President Trump and our economic team, and what would be Elizabeth Warren and Biden. So, I think you're going to see a very, very stark difference. We are about a pro-economic recovery. We built a great economy once, we're building it back. We want to do it in a way that's fair. But this is – we are not in favor of socialism. So, you know, the government can't afford to spend another $10 trillion to give everything away and create a socialist economy.
KERNEN: You know some people – Andrew wants in, but I couldn't help laughing inside that we don't like socialism as we're talking about CARES Act at 9, 12, 14 and 19 that we're getting ready to do, along with the Fed. So, I guess it just depends on what you call socialism.
MNUCHIN: Well we're not – let me be clear, we're not focused on CARES 9, we're focused on CARES 4.0 right now.
KERNEN: You know what I mean. I mean, we're at trillions and trillions already have government assistance, which is necessary, but –
MNUCHIN: We are, but it's worked. And let me just say, people thought we'd have 30 or 40 million people unemployed because of the policies the President put in place working with Congress. We never got there. And we're safely reopening. So yes, there are areas of the country that have had hotspots, but look at places like New York, which were a major disaster beforehand. You know, the virus is completely under control there.
ANDREW ROSS SORKIN: Mr. Secretary, the question I have relates to debt. And it's a Republican issue, it's a Democratic issue across the board, which is what's the upper limit in your mind of what the national debt can be? Is there is there a line of which we can't cross?
MNUCHIN: I think there's two ways you have to look at the debt. One is a percentage of GDP, and the other is debt service. So obviously, if you have interest rates that are 50 basis points versus interest rates at 5%, you can afford to carry a lot more debt. Now let me be clear, I'm not interested in loading up the government with trillions of dollars, but we spent trillions of dollars on a failed war in the Middle East. And we didn't stop halfway through and say, well we don't have enough money to finish it. I mean, I think this virus is like a war. And we have to make the investment now to make sure that American workers and American businesses can survive, but I am locking up a lot of money at very, very low rates. So, I got a lot of money at 20, 30 years. So, we have plenty of time to pay back a lot of this extra debt.
KERNEN: Mr. Secretary. Go ahead, Andrew, and then I got one more.
SORKIN: Mr. Secretary, let me just ask one question. You know, in war times or post war times, corporations have been asked, and wealthier individuals have been asked to pay higher taxes. That's something Vice President Biden has talked about doing if he were to win. If the Trump administration has a second term, do you imagine raising taxes on corporations and individuals in the same way or at all?
MNUCHIN: We have no intention of raising the corporate tax rates. The corporate tax rate spurred the greatest economic recovery. We had an incredible economic success. I think the President wants to make sure that on the individual side, there are fair taxes. We cut taxes for middle income people. So we had massive tax cuts for people. And that's what we're focused on. We're focused on economic growth. The American people want to get back to work, they want economic growth, we're going to get back to the greatest economy we had. And tax and spend is not the way to restore American workers.
KERNEN: Mr. Secretary, March 23 got pretty scary, pretty dicey. Down 38%. The market has come back like gangbusters. It's been just watching it on a daily basis, sometimes it even, you know it's hard to explain. And a lot of people talk about the Fed and central bankers and things like that. What have your thoughts been as you've seen, not only the comeback, but the series of new highs in the NASDAQ and things like Tesla and maybe some of the stuff – I mean, you've watched this for years and years. Have you been surprised by some of the developments in recent months?
MNUCHIN: Well let me just calm – you know, I've always said, I can't determine where the stock markets are tomorrow, I can't determine where it will be in two or three months, and next year. And there clearly are some individual stocks that valuations, you know, I'm not going to mention their names, one has to question. But when you look at the overall market, I do think it makes sense. And let me just say what some of the trends are. First of all, there's nowhere else to invest in the United States. People don't want to invest in the Euro, they surely don't want to invest in the RMB. So, there's people – there's a lot of dollars coming to the United States. When you look at the U.S. and people think there's going to be interest rates for a very – low for a long period of time, obviously the returns on stocks should come down. So that increases the valuations on stocks. And when you look at the overall market, there are sectors like retail and energy that are down a lot. And you're right, there are sectors like technology that are up a lot. And there's no question some of the technology trends are – this is great for technology companies. Some of the tech companies are people that want to pretend they're tech companies that may look a little different.
KERNEN: Would you be disappointed if I didn't ask you about the dollar? Because it's been weak lately. You know that that's a thing we have together, Mr. Secretary.
MNUCHIN: It is and I'm now very practiced on this.
KERNEN: It's been weak. Is it welcome by – the President probably isn't sure whether – I mean, a strong dollar is always great. But certainly, we get good exports with a weaker dollar. You have a feeling for it?
MNUCHIN: We want a stable dollar. That's what we like. We like a stable dollar. And the dollar reflects lots of money coming into the United States, so I'm not going to make any short-term comments on the dollar. Over the long term, you know, the dollar is the greatest place to be all over the world, the reserve currency of the world and we're going to protect that.
KERNEN: Okay. You knew that was coming. Anyway, Mr. Secretary, thank you for all your time today. I know we get a little bit long, we appreciate your time this morning.
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