Trump Cabinet picks: Ross and Mnunchin's exclusive interview with CNBC's 'Squawk Box'

Here is the transcript of the exclusive CNBC "Squawk Box" interview of Steven Mnuchin and Wilbur Ross, selected by President-elect Donald Trump respectively for Treasury and Commerce secretaries.

[EDITOR'S NOTE: The following transcript has been updated to reflect the full interview. An earlier version omitted some of the exchange in error.]

Joe Kernen: I don't think the appointments are actually official yet, but can you gentlemen confirm this has happened?

Steven Mnuchin: We can, indeed. We're thrilled to be here and we're thrilled to work for the president-elect and honored to have these positions.

Andrew Ross Sorkin: Congratulations.

Kernen: Let's start with this. It's a two-prong question. Number one, because we talk about it all the time. What is the potential GDP growth for this U.S. economy, number one? What do you guys see it as that we can average? Number two, what are the most important things to get us there?

Mnuchin: Let me just say our most important priority is to sustained economic growth, and I think we can absolutely get to sustained 3 to 4 percent GDP and that is absolutely critical for the country.

Kernen: Not one or two quarters?

Mnuchin: No, I think it's seasonally adjusted this quarter but I believe we can have sustained growth at that level. And to get there our number one priority is tax reform. This will be the largest tax change since Reagan. We've talked about this during the campaign. Wilbur and I have worked very closely together on the campaign. We're going to cut corporate taxes, which will bring huge amounts of jobs back to the United States.

Kernen: Where do you think you can get to on that?

Mnuchin: We're going to get to 15 percent and bring a lot of cash back into the U.S.

Kernen: Is it possible, Andrew, to get to 15 percent?

Sorkin: It may be. We had a couple of different guests on —

Kernen: You think 25 percent.

Sorkin: We had a guest on earlier in the morning, a Washington analyst who was suggesting they thought that the conversation would start at 15 percent and potentially could creep up. I don't know if you think that is a possibility.

Mnuchin: I would first just say that corporate taxes are one component of revenues to the government. OK? And the main component is obviously personal income and personal taxes. So, we think by cutting corporate taxes we'll create huge economic growth. And we'll have huge personal income. So, the revenues will be offset on the other side. We'll have a big middle income tax cut. That's another big part of this in simplifying taxes. Taxes are way too complicated and people spend way too much time worrying about ways to get them lower.

Kernen: Is dynamic scoring going to come back into people believing it? Because people — we've had people on that just flat out on the left say there is no proof that it ever works. I don't see how they can come up with that. If you do 4 percent growth, you get more taxes, do you not?

Mnuchin: Of course it works and of course you have to have dynamic scoring. It would make no sense otherwise. And we're going to work with Congress. I think they understand that.

Michelle Caruso-Cabrera: Dynamic scoring means that when you cut taxes, some people believe that that changes behavior which leads to more revenue. Left has argued that there's no proof of that, supposedly.

Wilbur Ross: Well, this administration will prove it.

Kernen: The last administration kind of proved it in the converse I would say.

Ross: I would rather talk about what this administration is going to do.

Kernen: OK, the wrap is going to be the lion's share of the tax cuts go to the wealthy. Not just the amount, but also the percentage cuts.

Mnuchin: It's not the case at all. Any reductions we have in upper income taxes will be offset by less deductions. ... There will be no absolute tax cut for the upper class. There will be a big tax cut for the middle class, but any tax cuts we have for the upper class will be offset by less deductions that pay for it.

Kernen: Should I donate to charity then this year? I mean, what are you going to do?

Mnuchin: They'll still let you do charities, but there'll be other deductions that are absolutely limited to pay for this.

Caruso-Cabrera: How about mortgage debt?

Mnuchin: Again, we'll allow — we'll cap mortgage interest, but allow some deductibility.

Sorkin: Some of the analysis that suggested the middle class — that certain people, especially I think single family — single household — single parents, they may ultimately pay more. Have you seen those?

Mnuchin: We don't believe in that analysis. When we work with Congress and go through this, it will be very clear. This is a middle income tax cut and the child care credit is a big aspect of this. This is something we've worked on in the campaign and one of the benefits of this is Wilbur and I have worked together throughout the campaign with the president-elect and the policy team. So this will be an integrated approach across Commerce and Treasury. So another big area is going to be trade reform where again it cuts across both Commerce and Treasury. We believe in fair trade and we think that's going to be a big boost to the economy, as well.

Sorkin: Can you tell us about the negotiations with Carrier, which I think we're going to learn about later?

Ross: Well, it is a great present from the president. Here we have a trade victory before we've even come into office.

Sorkin: Do you think a large part of your roles are going to be negotiating with American companies to keep them in the United States and how are they going to be one-off deals? What does the Carrier deal actually look like? I think there's still questions about what —

Caruso-Cabrera: What were they offered, and why did they stay?

Mnuchin: First thing I would say is it starts with an attitude. Of this administration, this president, this vice president-elect is going to have open communications with business leaders. You can see this started because the president-elect called up the CEO of United Technologies and said it's important to keep jobs here. And Wilbur and I will continue that. And again as he said, this is a great first win without us even having to take the job.

Caruso-Cabrera: But the reason those jobs were going to go to Mexico is because they were cheaper. It would help the company stay more competitive. How do you address the underlying issues of why companies want to leave the United States?

Ross: Well, first of all, it's more complicated than that. Mexico has 44 treaties with other countries that make it very advantageous to do international shipping from Mexico rather than from the United States. Believe it or not, Mexico has better treaties with the rest of the world than the United States does. We're going to fix that.

Caruso-Cabrera: So that would help address — the initial problem is why do they want to go anyways?

Ross: On a typical car, they save twice as much on tariffs going into Europe out of Mexico as they do going into Mexico to save labor.

Kernen: Wilbur, whenever you are on, we say 'Where are you in the world?' a lot of times, and you might be in the U.K. or you might be — you're all over. If anyone has benefited from free trade, it might be Wilbur Ross and your company. You saw the rhetoric during the campaign. I mean, a lot of people said the market is going to sell off 2,000 points if Trump pulls off a surprise win because we're going to be a protectionist country that is not interested in free trade. How do you square that up with your whole career?

Ross: First of all, protectionism is a pejorative term. It's not really something that's meaningful. There's trade, sensible trade, and there's dumb trade. We've been doing a lot of dumb trade. And that's the part that's going to get fixed.

Kernen: What if we put tariffs on Chinese goods? What is going to happen? And then, if we put tariffs on Chinese imports, what are they going to do with iPhones?

Ross: Everybody talks about tariffs as the first thing. Tariffs are the last thing. Tariffs are part of the negotiation. The real trick is going to be increase American exports. Get rid of some of the tariff and non-tariff barriers to American exports.

Kernen: Isn't some of [the Trans-Pacific Partnership] — isn't that what it did? Got rid of a lot of tariffs?

Ross: No. Not at all. For one thing, TPP had terrible rules of origin. Rules of origin means can stuff come in from outside the boundaries of the treaty countries. In automotive, the majority of a car could come from outside TPP. Namely could come from China and still get all the benefits of TPP and if it came in through Mexico, all the benefits of Mexico.

Kernen: Is that a bad deal, Steven, you think?

Ross: Horrible deal.

Mnuchin: Absolutely.

Kernen: TPP was a bad deal?

Ross: Horrible.

Mnuchin: Absolutely, and we believe in bilateral negotiations. And we will have very good deals with lots of countries.

Caruso-Cabrera: Interesting. So this huge regional approach to trade you think is a bad idea. Country to country to country.

Mnuchin: Absolutely.

Ross :The problem with regional trade agreements is you get picked apart by the first country. Then you negotiate with the second country. You get picked apart. And you go with the third one. You get picked apart again. What has to be put into perspective, we are the big market. We are the world's biggest importer. We need to treat the other countries as good suppliers. Not as determining the whole show.

Kernen: We've got so much to do, so little time. Can you guys stay until 9? I'm kidding, but we'll keep you as long as we can. I just want to get to Dodd-Frank quickly. A lot of people were hoping for [Republican Rep. Jeb] Hensarling. I saw John Allison yesterday. Both those gentlemen probably have much more strident views about Dodd-Frank and what we keep and don't keep there. Does your nomination make it less likely that that entire bill is gone, or will you go softer on reform of Dodd-Frank than those other guys?

Mnuchin: We look forward to working with Hensarling and the other people in Congress on this. OK? And I think one of the good things about both Wilbur and I, we have actually been bankers. We were the only two people during the financial crisis that were issued licenses by the government.

Kernen: You're supposed to whisper that for the last eight years, aren't you? But you're actually copping to that.

Caruso-Cabrera: Badge of honor, you think it is.

Mnuchin: We've been in the business of regional banking and we understand what it is to make loans. That's the engine of growth to small- and medium-sized businesses. So, as we look at Dodd-Frank, the number one problem with Dodd-Frank is it's way too complicated and cuts back lending. So we want to strip back parts of Dodd-Frank that prevent banks from lending. And that will be the number one priority on the regulatory side.

Caruso-Cabrera: What about the Volcker Rule?

Ross: Many of the smaller banks have had to get to the point where they now have more compliance people than they have lending offices. That's crazy.

Sorkin: What about the Volcker Rule and the Consumer Protection Bureau?

Mnuchin: We're going to look at all these things, but the number one problem with the Volcker Rule is it's too complicated and people don't know how to interpret it. So we're going to look at what to do with it, as we are with all of Dodd-Frank. The number one priority is going to be make sure that banks lend.

Sorkin: Right, Steven, this is sort of one of the first opportunities people are going to get to know you publicly. You have not been as much of a public face as Wilbur has historically. I talked to Hank Paulson, who you worked for, last night on the phone. Put this in The New York Times this morning, he said he is very talented, has a deep understanding of finance and markets, he knows how to bring people together to get things done. Importantly, he has a working relationship with and the confidence of the president-elect. This was a big gamble for you, to some degree, or at least feels like that, when you decided to put your lot in with him early. A number of your colleagues and peers raised questions about doing it. Did you think of this as a true idea of getting into the administration early on?

Mnuchin: Let me first say, and I've heard a lot of people say, this was a gamble. This was never a gamble from my perspective. I've known the president-elect for over 15 years. I believed in his policies. And I thought he would win, but I did this because I believed in it. Despite the fact there were a lot of people in California and New York that wanted to stop being friends. They've all come back.

Caruso-Cabrera: So Joe has brought up that you've donated money to Barack Obama and to Hillary Clinton in the past. Why?

Mnuchin: Like the president-elect, I lived in New York and gave money to certain Democrats. I did give, the most substantial gift was to Mitt Romney last time, OK? And I have been a Republican.

Caruso-Cabrera: So, transactional, not conviction.

Kernen: I feel better. My question was going to be, you gave money to the current president, obviously, and you're going to try to reverse, I would hope, a lot of the economic — you know, people argue about whether there has been a great economy or bad economy. I argue we were well below our potential for eight solid years. Tepid at best. You backed him over the Republican candidate. You were with Hillary before that. What about those —

Mnuchin: Let me just say I didn't say I backed them. I said I gave money to them. But I agree with you completely. The problem has been for the last eight years, there's been no economic growth. What we saw from traveling with the president-elect to all these rallies is for the average American worker they've gone nowhere. Our job is to make sure the average American worker has wage increases and have good jobs. That's the priority of this administration.

Kernen: It's nice at 4.9 percent, though, to start there because you may not need minimum-wage work. I mean, if the labor market is tight, you increase demand and growth. This should happen. This should happen. You guys could be coming in at a really opportune time.

Mnuchin: It should happen and when we cut corporate taxes, that's going to create a huge opportunity for more jobs.

Kernen: How will you repatriate? How will you do that and satisfy everyone involved that says no jobs are created, just goes to shareholders or dividends?

Ross: That's just not true. And it's also not true that all jobs are created equal. A guy who used to work in a steel mill now flipping hamburgers, he knows it's not the same. So it's the quality of jobs as well as the quantity, and one of the problems with the recovery is when the newly created jobs are not nearly as remunerative as were the jobs that were lost. That's a very big structural problem.

Sorkin: Steve, the confirmation process may be challenging. Democrats are already out in force. The oppo research, if you will, is out. Let me ask you two of the questions I know you're going to be asked. One about [OneWest Bank]. This is the headline from Bloomberg:Two housing advocacy groups allege that OneWest broke federal laws by keeping branches out of minority neighborhoods and making few mortgages to black and Latino borrowers. This is going to be a question that I know is going to get asked over and over again.

Mnuchin: Let me tell you one of the most proud aspects of my career was buying IndyMac during the financial crisis. We bought it from the government in a highly competitive six-month auction. And we saved a lot of jobs and created a lot of opportunities for corporate loans. One aspect to that is we bought the worst mortgage portfolio ... in the history of time. IndyMac was about 30 percent delinquent loans. So, all the loans we unfortunately had to foreclose on, we didn't originate those. Those were IndyMac loans. And the deal, when we merged with CIT, was the first bank deal to be approved over $50 billion. We went through a one-year comment period with the OCC and the Fed. The same community groups protested against the deal. The regulators looked at the deal and thought it made sense.

Sorkin: There's one other that's the sort of at the top of that list, if you will. New York Department of Financial Services found of the top 10 banks mortgage services companies identified for paying out insurance claims to Hurricane Sandy victims, that OneWest withheld the most of their insurance funds.

Mnuchin: Again, you're talking about certain specific things where, again, let me just show you the facts. We bought $150 billion mortgage-servicing portfolio from the government that we took as part of the deal. Mostly all third-party loans. We were the only bank to go through and have highly rated servicing for the entire period of under our ownership, and we're proud of that.

Caruso-Cabrera: Both of you guys understand interest rates and the bond market very well. I mean, you were in charge of trading mortgage backed securities, etc., right?

Mnuchin: Mortgages, governments, municipals, a little bit of everything.

Caruso-Cabrera: What do you think about what has happened to interest rates since the election and where do you think they are going to go?

Mnuchin: I think interest rates are going to stay relatively low for the next couple of years. We're in a period time of low interest rates. I think we'll stay there. And interest rates have come up a little bit, which I think makes sense. I think we're going to be looking at the Treasury all different types of opportunities. We will look at potentially extending the maturity of the debt because eventually we are going to have higher interest rates, and that is something this country is going to need to deal with.

Caruso-Cabrera: How long, 50 years? 100 years? Will you do what some of these other countries are doing?

Mnuchin: I think we'll take a look at everything and see what makes sense.

Caruso-Cabrera: What do you think, Wilbur? Why are interest rates going up, and where are they going to?

Ross: I think the Fed's going raise in December. That will have nothing to do with us.

Caruso-Cabrera: But, that's not why the 10-year's rising, right, since the election?

Ross: Well, everything affects everything.

Kernen: Steven, no government experience. It's like music -- I'm not going to say it — but no government experience. And I look at Jack Lew. All he had was bureaucratic experience. You know this stuff inside out. It might work. Let me ask you this. Every Treasury secretary in history has said strong dollar is in the interest of the United States but then I see that sometimes I see that either the Federal Reserve or even sometimes the Treasury — everybody likes a cheaper currency for exports. What do we really want in this country? What will you press for? Strong dollar or capital comes in? Or every time we do that corporations squawk about currency headwinds.

Mnuchin: First of all, I think the United States is the greatest country in the world to invest in. And we see that. And we see that money is pouring into the United States for those reasons. So I think we're really going to be focused on economic growth and creating jobs. And that's really going to be the priority.

Sorkin: China currency. Trump's wanted to call a manipulator. Is that something you think you want to do?

Mnuchin: Well I would just say, one of the things, Wilbur and I are going to work very closely together. As you look at both of us in the U.S. Trade Representative [Office], this will be a coordinated aspect. So, there is enforcement aspects of trade agreements that are in Commerce and [there are] enforcement acts in Treasury. So if we determine that we need to label them as a currency manipulator, that's something the Treasury would do.

Kernen: Are you a fan of Janet Yellen, Steven?

Mnuchin: You know, look. I think she's done a good job at the Fed.

Kernen: She should continue to serve out her term?

Mnuchin: I'm not going to comment on whether she should or she shouldn't.

Kernen: Wilbur? Janet Yellen? You a fan?

Ross: Whether she should or shouldn't — I think that she dealt with a very difficult situation and did a reasonably good job.

Kernen: But she may serve out her term. Will she be renominated?

Ross: That's really a question for her and the president; it's not a question for us.

Mnuchin: But I will say we do have two [Fed] governor spots to fill, and that will be high on the priority list.

Sorkin: Are you both going to get active Twitter accounts? Is that on the list.

Mnuchin: The answer is I do now have an active Twitter account only because there was a fake Twitter account so I had to have a real one. I used to have a pseudonym for Twitter and I'm trying to get my check to verify me. So, hopefully, now Twitter will give it to me.

Kernen: Well, gentlemen, congrats on the appointments and good luck.

Sorkin: Good luck.

Kernen: I don't think it's going to be –

Michelle: Did you ever think, Wilbur Ross, that you were going to work for the government?

Kernen: Yeah, we said that already.

Ross: No. I didn't think I would ever have a boss again.

Kernen: You're going to get through this easily. Just your breadth of knowledge on all of these things. Thank you.

Mnuchin: Thank you, very much.

Sorkin: Thank you. Congratulations. We look forward to seeing you many more times.