“We're going to lower rates -- we're going to simplify it -- but we're going to get rid of this whole host of deductions,” Mulvaney said. “The most defensible, conservative with a small 'c,' way to look at this is to say, ‘[Tax reform] will be deficit neutral.’ ”
A few minutes later, Treasury Secretary Steven Mnuchin told another Senate panel something very different. He said the massive cut in tax rates would be offset in large part because the economy would grow a tremendous amount.
“It would be paid for with economic growth and base broadening,” Mnuchin said.
The nuance might seem small, but it is the economic equivalent of comparing cats and dogs. The nuance can be measured, literally, in trillions of dollars.
Mulvaney and Mnuchin, two of the most influential economic advisers within the Trump administration, gave contradictory answers to the same question, on the same day, testifying before the same chamber of Congress.
It fits a pattern of confusing and often opposing economic pronouncements emerging from a White House which has struggled to translate thematic campaign promises into concrete economic policies.
The White House has offered conflicting — sometimes opposing — ideas on financial regulation, trade policy, tax policy, infrastructure, health care policy and the deficit.
So far, four months into the Trump administration, many of these initiatives are stalling or slowing, in part because lawmakers and even senior White House officials aren’t sure precisely what the Trump administration’s position is.
Trump has said he wants to consider breaking up the largest American banks, and White House National Economic Council Director Gary Cohn told senators during a private meeting that they were supportive of a modernized version of the Depression-era Glass-Steagall law that prohibited commercial banks and investment banks from merging. Mnuchin, meanwhile, has said the White House does not support this and doesn’t want to force large banks to split in two.
On trade policy, Trump vowed to label China a “currency manipulator” but later said the country does not manipulate its currency. Then Mnuchin said China only stopped manipulating its currency once Trump was elected. (Data shows this is not the case; it happened years before.)
Trump also prepared to withdraw from the North American Free Trade Agreement, but he was talked out of it at the last minute and has now decided to renegotiate the trade pact. But it remains unclear, regarding NAFTA, the specific things the U.S. wants to change.
On health care, Trump vowed during the campaign not to make cuts to Medicaid. But his budget would cut — according to Mulvaney — somewhere between $800 billion and $1.4 trillion in future Medicaid spending over 10 years.
On infrastructure, Trump has said he wants to put together a $1 trillion package of projects. Cohn directed others on the team to assume this would cost $200 billion in public money, which would be matched with $800 billion in private funds. But Trump has said he might do it with only public money. And he has said the infrastructure plan might be combined with his broader tax overhaul effort as a way to lure Democrats. But Mnuchin has said the two issues would not be combined.
Perhaps nowhere has the White House been as hard to pin down as on their tax strategy. Mnuchin wanted a complete overhaul of the tax code by August, but now they are hopeful it might happen by the end of the year.
Mulvaney's new description of the tax plan, which relies on eliminating tax breaks to offset the rate cuts, creates a new set of challenges. If the White House insists that a central part of their tax plan will cut taxes for the middle class, they will have to raise taxes on someone else. Otherwise, the plan cuts revenue and adds to the deficit.
That's why Mnuchin's description is so significant. He says that the economic growth that would come from cutting taxes would replace this revenue, but this clashes sharply with Mulvaney's description of the plan.
On Thursday, he told the Senate Finance Committee he would not raise the Social Security retirement age to offset the tax cuts, he would not change the earned-income tax credit, would not change the mortgage-interest tax deduction, and had no plans to change the New Markets Tax Credit.
These statements came during pointed questioning from Sen. Sherrod Brown (D-Ohio), who was trying to pin the administration down on certain details. It was a revelation, until a short time later, when Mnuchin appeared to put all those things back on the table.
“We're looking at everything,” Mnuchin said. “Nothing is off the table as far as we're concerned.”