President-elect Donald Trump’s nascent administration on Wednesday began outlining the contours of its strategy for jump-starting the nation’s economy, including how it would overhaul the tax code, rethink trade agreements and directly negotiate with major corporations.
Treasury secretary nominee Steven Mnuchin rejected claims that Trump’s tax program would benefit mainly the wealthy, instead highlighting plans for a child-care tax credit and a middle-class tax cut.
“There will be no absolute tax cut for the upper class,” he said on CNBC. “There will be a big tax cut for the middle class.”
Trump’s strategy secured an early victory this week when the president-elect persuaded air-conditioning manufacturer Carrier not to move up to 1,000 jobs from Indiana to Mexico. The negotiation was an unusual move for a modern president, but Mnuchin suggested such direct intervention would be an important tool under the new administration.
“It starts with an attitude of this administration,” Mnuchin said Wednesday on CNBC. “This president, this vice president-elect is going to have open communications with business leaders.”
Mnuchin and Trump’s pick for commerce secretary, Wilbur Ross, also called for moving away from the broad multinational free trade agreements that have shaped the global economy over the past generation in favor of bilateral deals. But they stopped short of embracing the president-elect’s most heated election rhetoric, calling for double-digit tariffs on imports from China and Mexico.
Turning Trump’s sweeping campaign promises into reality could prove a daunting challenge for his newly named economics team, which includes Todd Ricketts, co-owner of the Chicago Cubs, as deputy commerce secretary. Trump’s proposals are both expansive and aggressive, starting with a pledge to create 25 million jobs and push growth to 4 percent annually.
[Trump’s new Treasury, Commerce nominees say no ‘absolute’ tax cut for the wealthy, predict faster economic growth]
Many economists have questioned whether that is even possible in the face of an aging workforce and slower growth in productivity. In addition, rewriting the tax code would be a mammoth undertaking that has eluded Republican lawmakers since the 1980s, and independent analysts cast doubt on whether Trump can make the numbers add up.
On Wednesday, Trump’s new economic team said that overhauling taxes — particularly cutting the corporate tax rate — would create incentives for businesses to invest and hire more workers, eventually resulting in higher tax revenue. But an analysis by the independent Tax Foundation estimated that Trump’s plan would cost at least $2.6 trillion over the next decade, even after accounting for stronger growth.
Mnuchin and Ross reiterated the administration’s commitment to cutting taxes for the middle class, but that remains a key difference between the president-elect’s campaign plan and the tax blueprint put forth by GOP leaders on Capitol Hill.
The congressional plan, like Trump’s, would cut taxes for the wealthy and for corporations, but it would not do nearly as much as Trump would to cut taxes for lower- and middle-income Americans.
Reconciling the two will be a major sticking point in any tax-reform negotiations next year, although House Speaker Paul D. Ryan (R-Wis.) praised Trump’s nominees on Wednesday.
“I am excited to get to work with this strong team to fix our broken tax code, ease the regulatory burden on American businesses, and grow our economy,” he said.
Mnuchin also pushed back against analysis by the nonpartisan Tax Policy Center that found the bulk of the benefits under Trump’s plan would go to wealthy households, while some single-parent households would end up paying higher taxes.
“We’re going to have the most significant middle-income tax cut since Reagan,” he told reporters.
Business groups welcomed the focus on tax cuts and praised Trump’s nomination of Cabinet officials with industry backgrounds.
“They understand that modernizing our outdated, anticompetitive tax system will be the most effective way to produce the economic growth that puts more people to work in good jobs,” said John Engler, president of the Business Roundtable.
On trade, Mnuchin and Ross sounded a somewhat softer note than Trump did on the campaign trail. During the election, Trump called China the world’s “single greatest currency manipulator.” But on Wednesday, his top economic advisers demurred when asked whether they would take formal action against the country.
“If we determine that we need to label them as a currency manipulator, that’s something the Treasury would do,” Mnuchin said.
And though they expressed disapproval of sweeping multinational trade agreements in favor of bilateral deals with other countries, they backed away from threats to impose double-digit tariffs on imports from Mexico and China.
“Everybody talks about tariffs as the first things. Tariffs are the last thing. Tariffs are a part of the negotiation,” Ross said on CNBC. “The real trick is going to be increase American exports.”
Trump’s efforts to keep Carrier in Indiana underscore both the potential benefits and pitfalls of his hands-on approach. Under the agreement, the company will receive tax incentives from the state economic development corporation to keep about 1,000 jobs in the state, said John Mutz, a member of the agency’s board and the former lieutenant governor of Indiana.
“The dynamics of the situation changed,” Mutz said.
[After Trump pledged to keep Carrier jobs in U.S., company says it won’t move nearly 1,000 to Mexico]
Mutz said he had not reviewed the final terms of the agreement and could not provide details about how much money the company would receive or over what period. If the agreement is only for a few years, Trump’s efforts might give workers only a temporary reprieve.
Experts said custom deals such as the one struck with Carrier could create a haphazard system in which the government winds up picking corporate winners and losers, said Timothy Bartik, an economist at the nonpartisan W.E. Upjohn Institute for Employment Research. Instead, he said, governments should focus on providing training for workers and investing in research and development to encourage businesses to invest and grow.
“The trouble with striking just individual deals is that means that some people are subject to different rules,” Bartik said. “If you think of things as deals, who gets the deals? Does it become a system of favoritism?”
Although the agreement was celebrated as a win in the United States, officials in Mexico faced growing uncertainty.
Carrier had already begun building a new factory in the outskirts of the city of Monterrey, although company officials would not say whether any of the 2,000 employees originally projected to staff it had been hired. Paulo Carreño, a deputy foreign minister in charge of North American relations, said that every company on both sides of the border “has full liberty to decide where to put their own business.”
“What we have created with the U.S. and Canada is we not only buy and sell things with one another, we build things together,” he said. “We need to not only keep this relationship but to deepen it.”
Jim Tankersley and Josh Partlow contributed to this report.