WHEN: Today, Wednesday, September 30th
WHERE: CNBC's "Squawk on the Street"
Following is the unofficial transcript of a CNBC interview with United States Treasury Secretary Steven Mnuchin live from the CNBC Institutional Investor Delivering Alpha Conference on Wednesday, September 30th.
Following are links to the video of the interview on CNBC.com: https://www.cnbc.com/video/2020/09/30/treasury-secretary-mnuchin-airline-federal-aid-delivering-alpha.html and https://www.cnbc.com/video/2020/09/30/mnuchin-says-hes-hopeful-that-white-house-and-democrats-can-strike-stimulus-deal.html.
Mandatory credit: CNBC Institutional Investor Delivering Alpha Conference.
Becky Quick: Thank you so much. And Mr. Secretary, let me thank you for spending so much time with us today we truly appreciate it because we know how busy you are these days. I think right now the most important question on Wall Street and probably in America at large is what's going to happen in terms of another financial aid package we've got millions of Americans who are out of work, got businesses, small and large that are in crisis at this point, through no fault of their own. Will we see another financial package to aid them before election day.
Secretary Mnuchin: Well, the President I are working hard on a bipartisan proposal. I spoke to Speaker Pelosi several times over the weekend we had a conversation for about an hour. Yesterday, going through different aspects of it and I expect, I will come back with her later this afternoon and we'll deliver a response so I think we'll have a very reasonable response, something that's very similar to what has been the bipartisan proposal that the problem solvers has worked on and I hope we can get something done because as you said there are clearly still businesses out there, small businesses that are impacted we need more money for kids going to school we need liability protection for small businesses to open the economy. And we're going to continue to work hard to try to get those results to the American people that are impacted.
Quick: Mr. Secretary, you're usually pretty even keeled and you are probably the person most of the administration who has reached across the aisle and try and have these conversations, although I have gotten a sense lately that you've been a little frustrated too I just wonder in those conversations with Speaker Pelosi, is it more or less contentious than the debate we saw last night.
Secretary Mnuchin: Well the speaker and I have a relationship which is really it's all business, I think we're very effective in communicating with each other in many cases, we do have things that we agree on and we have things that there are differences and we're trying to see if both of us can manage a package that gets some of what everybody wants.
Quick: Do you think that's likely because I have to say at this point on Wall Street most people have written off the idea that there will be any package that can be decided at least not before the election.
Secretary Mnuchin: Well I say we're gonna give it one more serious, try to get this done and I think we're hopeful that we can get something done. I think there's a reasonable compromise here, something that the President very much wants to get down and make sure that we help those parts of the economy that still need need help, so we're gonna try to see if we can get something passed.
Quick: Even if you do reach an agreement with Speaker Pelosi you still have the Republicans in the Senate who have been pushing back and who the demands, they put forth the things that they'd like to see is a much skinnier package than I think the administration and the White House has been on it kind of put forth they're looking to spend less than $900 billion. How would you bring those Senate Republicans on board and have you spoken to any of them?
Secretary Mnuchin: Mark Meadows and I spoke to both Kevin and Mitch McConnell yesterday, we went through with them, what our thoughts are. And, you know, let's see if we can get a compromise agreement with the Speaker something that works. And then we'll continue to work with both sides to work on all the exact language and the policies.
Quick: Can you give us any idea of the scope of what is there in the middle ground I mean I think I can guess at some of these things with what's targeted what seems to have bipartisan support I would throw out things like extending unemployment, to some extent, and raising that number may be extending some money for small businesses potentially the airlines, making sure that this is targeted information but can you give us any scope about the things that you've been discussing that you think are likely and that there is common ground.
Secretary Mnuchin: Well, first let me say all the issues that we worked with the Senate on the trillion dollar deal are in there. In many cases, we actually have an agreement between the Republicans and the Democrats on what we want to do, but in certain cases, the issue is really about the size and scope of how much we want to do so there are certain policies where we do have differences but there's a lot of commonality, things like the PPP has enormous bipartisan support, money for schools has enormous bipartisan support. We have additional direct payments economic impact payments, which has support on both sides. We have back to work credits we have retention credits. So I think there's many areas. You mentioned the airlines we do support more money for the airlines that's something that's critical to keep our airline workers together,
Quick: The airlines have issued a deadline up tomorrow before they will lay off 30,000, or even more employees that come up Do you think that there will be any sort of a carve out, or that this legislation could get passed before tomorrow's deadlines just for that industry in particular.
Secretary Mnuchin: I don't think there'll be anything on a standalone basis, you know, I would hope that by tomorrow we either have an understanding on an overall package, that doesn't mean obviously there wouldn't be a lot more work to do. But I am hopeful that we can come to an overall understanding. And if we do that, hopefully the airlines will postpone their actions I will say, I'm very proud of the people at the Treasury Department who have been working very hard to close all the airline loans we got that done. And there's a lot of support we've already delivered for that industry.
Quick: Have you had any conversations with the CEOs of those airlines asking them to make sure that they would hold off on laying off anyone if there looks like there's at least some understanding between the parties.
Secretary Mnuchin: I have spoken to all the airlines CEOs on a constant basis, I think they've done a good job reaching out to both Republicans and Democrats, and I'll be calling them this afternoon and giving them an update on my conversations with the Speaker.
Quick: Based on what you've said Mr Secretary, it sounds to me like the two big outline issues that you would have between the left and the right is that the democrats really want to make sure that states, see some sort of aid that's given to them to make sure that there aren't additional layoffs that happened to teachers and fireman along the way and and the right the Senate. the Republicans in the Senate have said that they would like to make sure that they see liability for businesses, make sure that they're not liable for things that might happen by reopening during COVID times if they're following the rules. Do you think those two issues would be something that would be combined here would you take each of those out.
Secretary Mnuchin: Yeah, we'd have we'd have to have both of those in. It's very important for us to make sure that we have reasonable liability protection, that's both for schools and for small businesses. The Speaker and I have had discussions on that. We also know that, you know, the issue of money for state and local government is something that there is a divide on, we're going to try to come up with a compromise on that. I will just say in in the regulations we've already done. We've given the states flexibility to make sure that they could use the money they have to pay first responders firemen and policemen, other people the President doesn't want to see these people laid off. These are critical emergency workers that are really working around the clock to support all of us right now. So we will be allocating some more money in a compromised package to pay for that.
Quick: Mr Treasury Secretary. Last week I spoke with Brian Moynihan the CEO of Bank of America and he said that based on what they are seeing at the bank. They believe that it will probably take about five quarters before you get back to the growth levels that we were seeing before the pandemic growth of GDP growth of one to 2%. He didn't say if there was another aid package that was passed he thought that that could move things forward I guess I would ask you what's your expectation for the economy and what's your expectation if there's no more aid that's passed.
Secretary Mnuchin: Well let me first say, I think the economy is doing much better than anybody expected at this point, but the unemployment rate dropping back down to close to 8% is really extraordinary from what had been very high levels in closing the economy. So as we've reopened. I think you've seen a very good rebound I think you're going to see a very good quarter. Having said that, we still have more work to do. Until we get everybody back to work. The President and my job is not done that's something that we're very focused on. And I would say that clearly this package will help the economic recovery and I would also say the progress that we're making on vaccines and testing also is going to help the economic recovery. The 150 million avid tests that we have that will be delivered between now and the end of the year. And those are mostly going to go to schools nursing homes and other types of institutions. Very cost effective $5 a test, you can do them very quickly get the response very quickly. These types of advances and testing is really going to create a boost for the economy.
Quick: I guess I would ask what your outlook for the economy. I mean, it's very hard to try and pin this down at this point because we don't know what happens with COVID during the winter months, we'd have had lots of doctors including Dr. Scott Gottlieb who joined us today to say that he does think we will see a resurgence of coronavirus virus cases in the winter here I don't know what that means potentially for businesses having to shut down again. But I wonder your own forecast how do you measure this how do you kind of see out and what is built into your forecast in terms of what we see with coronavirus in the next few months.
Secretary Mnuchin: Well I've been listened to the medical professionals and again I take great comfort in the progress that's being made on vaccines I think it's pretty clear we're going to have a vaccine, what the exact date is, we'll see. It could be soon it could be the end of the year. But I think that the money that we've invested in vaccines vaccine development manufacturing is really going to pay off. It was a extraordinary commitment that is really going to help. I would also say, as you look at more and more testing, you're going to see more cases, I had an experience with someone. In the last two weeks, who was tested, they never even had any symptoms. So I think this is a very bizarre disease in certain cases people get it with no symptoms. In certain cases, it is difficult, especially when people have medical conditions but clearly the economy is tied to the medical advancement. And I think the traditional I've said before, traditional economic models don't work but what I can tell you more fiscal response will help the economy. And I would also say, the sooner we're able to get these advances of testing and vaccines into the economy, the better off we'll pay.
Quick: Let's talk a little bit about China, obviously that relationship between the United States and China has been fraught recently. Do you think that there is a TikTok deal that could be reached that would satisfy both the Trump administration's needs on this and the Chinese government,
Secretary Mnuchin: Well I know there's a lot of interest in TikTok but let me just start with the bigger issue on China, which is, you know, clearly this disease started in China. I think everybody in the world wants answers as to why it spread around the rest of the world and it didn't spread around China. I think that this has cost enormous amount of money and lives. And I think that the American public and people around the world deserve complete transparency. That to me is the bigger issue now on the tick tock deal. We negotiated and the President was part of helping to negotiate the deal between Walmart and Oracle, and TikTok, I think it's a great outcome. It'll build a world class, US based company with controlled by us investors. We'll see if the deal can be closed on our terms. We'll do it. If not, it will be shut down. And the President is focused on national security and any deal will fully satisfy all of our national security issues,
Quick: Meaning that the algorithm would have to be controlled here in the United States and not based in China.
Secretary Mnuchin: Again, all of the code will have to be in the United States, Oracle will be responsible for rebuilding the code sanitizing the code, making sure it's safe in their cloud. And, again, it'll satisfy all of our requirements.
Quick: Just the broader issues that you mentioned, the tension over the coronavirus, our relationship with China, on that front with Huawei, with Hong Kong and so many other issues. Where do you think that leaves us in terms of our trade relationship with China?
Secretary Mnuchin: Well the President's been very clear. And the President has said from day one from our first meeting with President Xi, we need to have a fair and balanced trading relationship. For too long, this has been a one-way relationship with the U.S. market has been open to them and their markets have not been open to us. I think, as you know, the President put tariffs on to rebalance that relationship. Ambassador Lighthizer negotiated a fabulous phase one trade agreement, which is really incredible in the amount of things that China agreed to do. We're beginning to see the impact all of that now and in the President's second term he's going to be very focused on phase two. He wants to see this relationship rebalanced, the trade deficit is too big, and it's not on fair terms.
Quick: 3,500 American companies including names like Target, Home Depot, and Ford are suing the administration right now over those tariffs that you mentioned on over $300 billion in Chinese goods. What do they not get?
Secretary Mnuchin: I'm sorry I don't know – what's your question about them suing?
Quick: What do they not understand?
Secretary Mnuchin: They have their own self interests and that's okay because they represent their shareholders. But it is in the best interest for a lot of that business to be moved back onshore in the U.S., to create U.S. jobs. Or we need to make sure that we can open up the Chinese market. There's a growing middle class, 300 million people that have – U.S. companies can sell fairly into that population, that's an enormous boon for U.S. companies. So in one format or another, this trading relationship will be rebalanced.
Quick: The New York Times came out with a report this week suggesting that after looking through hundreds and thousands of documents from President Trump's tax returns that he paid little to no taxes in 11 out of 18 years including 2016 and '17 as President. I guess my question to you is in the past, President Trump has said he doesn't pay more in taxes because he's smart. Should we have a tax code that lets billionaires and millionaires use it to make sure they find loopholes while average Americans are stuck in a position of having to follow the rules and pay taxes?
Secretary Mnuchin: Well, let me just say I think you know I oversee the Commissioner of the IRS. And as such, it would be inappropriate and not legal for me to comment on any individual's tax situation. So, I'm not going to make any specific comments on that. I will say that for all taxpayers, we need to have a tax code that is fair, and that balances taxpayer rights with election issues. And that's the reason why we want more money to enhance the technology at the IRS, really to bring the IRS into the next century. So, we're working with Congress to get multi-billion dollars to enhance our technology, to make the taxpayer experience better, to make it more online. And that's something we'll do. Now as it relates to loopholes, when we passed the Tax Act, we closed lots and lots of loopholes. This was really about simplifying taxes. I think as you know most Americans now can fill it out on the equivalent of what would be a postcard, whether that's online or in paper. We lowered corporate taxes, we created economic growth and that's something we'll continue to do.
Quick: We are less than 40 days to the next election. If the President wins a second term, you've said that you'd be on board. Are you still on board for serving as treasury secretary for that full second term?
Secretary Mnuchin: I am on board. We have more economic work to do and will continue to be focused on that.
Quick: I guess you start to wonder what that term looks like. Things have changed so drastically because of COVID and the spending that's taken place. We are now looking at U.S. deficits ballooning to nearly a trillion dollars in 2019. I know in the past the President had hinted that he might look at spending cuts to try and address the deficit in the second term, but with what we've seen lately that may not be possible. What do you think the deficit looks like if you're going out to 2022, 2023 and beyond?
Secretary Mnuchin: Well let me first say, the good news is this is not like other financial crisis. This will be over. So, we will see a complete reopening of the economy, we're going to see a vaccine that gives people confidence to get back to work. So, I am confident that with the President's economic agenda, next year, the economy will really rebound, very, very strongly. And as it relates to deficits, you know this is like a war. Killing COVID is like being in a war and we're going to spend what we need to spend. Now, we're not going to spend taxpayer money imprudently. So, the reason why we're sticking to what we believe is close to a trillion and a half dollars and not $3 trillion is that's what we think the economy needs now. And I will say there will be a time to look at deficits, I think over the long term that's going to be both a combination of growth, as well as a combination of slowing the rate of government spending. So, if we merely can slow down or keep flat government spending and we raise our revenues, that will help significantly. So, it's certain areas we may need to cut, certain areas we may need to continue to invest in. But I would encourage that we'll look at slowing down the rate of growth on spending.
Quick: Mr. Secretary, if Joe Biden wins, there are a number of names that have been circulated as a potential Treasury Secretary to serve him. Lael Brainard, Raphael Bostic. You've got names like Larry Fink and Tony James out there. I just wonder after serving in this in this capacity for, I guess, three years nine months maybe a little longer, I just wonder what you think the most important qualifications for this job are particularly given the circumstances we're in right now.
Secretary Mnuchin: Well some of those names are clearly very qualified candidates. I'm not going to comment on the specifics of any of them. I think the first issue is, you're going to have a very different economic agenda. So, no matter who the Treasury Secretary is, it is the Treasury Secretary's job to follow the President's economic agenda. One of the reasons I think I've been effective is, I've been with the President since the campaign. I know what his economic agenda is and we've executed it very successfully. I think one of the biggest challenges that the next Treasury Secretary is going to have is a very, very different economic agenda. But I think a knowledge of the economy, of the markets, how to manage. There's very large operational issues here at Treasury. I think as you know pre-COVID, I was spending close to 50% of my time on sanctions and national security issues. That was an area that I had no experience in, but I studied very hard when I got here. So, I think it's important that whoever the person is – and hopefully there won't be someone to worry about that with the President winning – but I think it needs to be someone who can handle a lot of different things.
Quick: You know, I think about that just about every job I've ever taken. The worries I had before the job were not the things that actually were the hardest parts of the job. So, I would just ask after serving in this job for this long, what was it that's been easier in this job than you expected when you got into it and what's been much harder?
Secretary Mnuchin: Well I would say clearly the easier part is you know, everybody who's not in government, you know, always makes it such a big deal that you need government experience. I think when I came into government even though I didn't have experience, we have a great professional staff here at Treasury and on the issues I didn't understand I studied very, very hard and got up to speed quickly. So, I would say that was easier than I expected. The part that was harder than I expected and one of the hardest parts was sitting in the Oval Office with the President when he made the difficult decision to shut down the economy. I think that's one of the hardest decisions any President ever has had to make. I think the President absolutely did the right thing. It was a very difficult choice, but it saved, lots and lots of lives. And I think the hardest issue has been how the President has decided both to close the economy, and then to safely reopen the economy.
Quick: Secretary Mnuchin, I spoke with you back in February of 2017 just as you were coming into this job. And at that point, you said that you look at the stock market as a barometer for how you are doing in the administration – sort of a report card. I just wonder if that's still the way you most measure the success of what you're seeing there?
Secretary Mnuchin: Well, I think I said at the time it was one of many indicators, so, is we look at how we're doing. You know, the one thing about the economy is there are real time numbers. So whether it's GDP, whether it's unemployment, whether it's the stock market, you get quick feedback. So, I think as you look at the stock market now, again, the economy has not completely rebounded, but I think what the stock market is showing you is we averted a complete disaster and the market has confidence in the economic plan that we're executing, and how the economy is going to look in both the fourth quarter, as well as the first quarter of next year. The stock market is really a discounted function of expectations of future earnings, and clearly there are stocks that have been hit very hard. So as you look at the economy, there are businesses – travel related businesses, hotels – that clearly have been hit very hard and there's been other parts of the economy that have done very, very well. Particularly some of the technology. So, I do think the stock market is an indicator now of the expectations of our economic plan.
Quick: At the beginning of this, I said that I think that the stimulus plan, additional stimulus, might be the biggest issue facing Wall Street and Americans right now. What would you say is the biggest thing?
Secretary Mnuchin: I would say it's one of the issues. Again, to me, the biggest issue, you know, is really the election, and what are two very different economic agendas going forward. I think now more so than ever, you see very, very different visions for what to do, what to do on taxes, what to do on regulations, what to do on big government. To me that's probably the biggest issue over the next four years. As it relates to the short term, we're going to create economic growth whether we get this fiscal deal done, or we don't, I am confident we will continue to have economic growth and rebound. Again, I hope we can get something done. But if we can't, we'll come back and work on it after the election.
Quick: And you think you'll have some sort of an answer one way or the other by tomorrow?
Secretary Mnuchin: I think we're going to be able to understand whether we have an overall understanding of the agreement in the next day or two. The Speaker and I have now been speaking, kind of continuously since last week, I think we're both making a good faith effort to try to get this done. And I think we want to figure out whether we can get it done and if not, move on.
Quick: Mr. Secretary, I want to thank you very much for your time today. We know you're busy, but we appreciate your being here with us at Delivering Alpha.
Secretary Mnuchin: Thank you very much.
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