CNBC Transcript: Treasury Secretary Steven Terner Mnuchin Speaks with CNBC’s “Squawk Box” From Davos Today
WHEN: Today, Thursday, January 23, 2020
WHERE: CNBC’s “Squawk Box” – Live from the World Economic Forum in Davos, Switzerland
Canyon Distressed Opportunity Fund likes the backdrop for credit
The Canyon Distressed Opportunity Fund III held its final closing on Jan. 1 with total commitments of $1.46 billion, calling half of its capital commitments so far. Canyon has about $26 billion in assets under management now. Q4 2020 hedge fund letters, conferences and more Positive backdrop for credit funds In their fourth-quarter letter to Read More
Following is the unofficial transcript of a CNBC interview with Treasury Secretary Steven Terner Mnuchin on CNBC’s “Squawk Box” (M-F 6AM-9AM) live from the World Economic Forum in Davos, Switzerland today, Thursday, January 23rd. Following is a link to video from the interview on CNBC.com:
Watch CNBC’s full Davos interview with Treasury Secretary Steven Terner Mnuchin
All references must be sourced to CNBC.
BECKY QUICK: Joining us now to talk more about taxes, trade and the economy is U.S. Treasury Secretary Steven Terner Mnuchin. And sir, it’s great to have you here today. Thank you.
STEVEN TERNER MNUCHIN: Great to be with you as well. And I didn’t bring any snowballs to throw at you this year.
BECKY QUICK: There’s plenty of snow right over here. You make some on the way out. And you can hit him. Not me. Let’s talk a little bit about what the President told Joe, just this idea of additional tax cuts coming. I was thinking this was something that you were gearing up and potentially thinking of if there’s another four years that that would be something happening now. But the President has since said that this is going to be something that’s probably coming to Congress in 90 days. Can you explain a little bit about what this plan is and how quickly you think you can move forward on it?
TREASURY SECRETARY STEVEN TERNER MNUCHIN: Sure. Let me first just put this in perspective because there’s no question that the President’s economic agenda is working. The combination of tax cuts, regulatory relief and trade getting the two big trade deals done last week. And the President has asked us to start working on what we call Tax 2.0. And that will be additional tax cuts that fuel the economy.
BECKY QUICK: What will they look like?
TREASURY SECRETARY STEVEN TERNER MNUCHIN: Well, they’ll be tax cuts for the middle class and we will also be looking at other incentives to stimulate economic growth.
BECKY QUICK: Can you give us any hint as to what that is yet? It’s still early?
STEVEN TERNER MNUCHIN: I won’t preview them here today. But again, they’ll be focused on items that will increase economic growth.
BECKY QUICK: Why looking at the middle class as tax cuts for there right now?
TREASURY SECRETARY STEVEN TERNER MNUCHIN: Again, I think the President feels that we need to continue to incentivize the middle class. That their taxes have been too high historically. We had big tax cuts already. And that’s an area we’ll continue to look at.
BECKY QUICK: This is all happening as the deficit looks like it’s crossing some new high levels. How do you kind of look at that? When do you expect that deficit will be tackled? And how are we going to do that?
TREASURY SECRETARY STEVEN TERNER MNUCHIN: Well, that’s a good question. Let me just step back for a second and comment on the first tax cuts. Because I stand behind my comments that the tax cuts will pay for themselves, despite "The New York Times" disagreeing with me today. We’ve tracked the numbers. We’re right on track for the first two years. Again, what we’ve said is kind of with the appropriate growth, and we’re running above those numbers, that we’ll have an excess of the trillion and a half dollars that was the static cut.
Now, let me just say, aside from tax cuts, we also did have increased government spending. And the reason for that was the President felt it was important to rebuild the military. It had been underinvested. And to get that done, we had to agree with the Democrats to increase non-military spending.
So, if you look at the increase in the deficit, a significant component of that is additional government spending. We did a bipartisan deal this year. But there’s no question, we need to slow down the rate of growth of government spending because we can’t sustain these deficits growing at these levels.
ANDREW ROSS SORKIN: Can I put a fine point on that? So, given the additional spending, you still believe that on a ten-year run rate that we will be flat or better in total as a result of those tax cuts, in terms of revenue in to match what also was the additional spending?
STEVEN TERNER MNUCHIN: Put the spending –
ANDREW ROSS SORKIN: That’s where the debate is.
TREASURY SECRETARY STEVEN TERNER MNUCHIN: Put the spending aside. And when people focus on the deficit this year, okay, what we said is the tax cuts, which were a trillion and a half dollars over ten years, again, front loaded with things like capital expensing. So, we’ve never said that kind of--in year one the President is absolutely correct revenues are higher. So, we’re talking about higher revenues. But as we look over ten years, we’re two years in. We can monitor this every year. We’re following our projections. And we think it will pay for itself. Now, that’s different than you can’t spend the money on tax cuts and spend the money on increased government spending. So over time we need to slow down the rate of growth of government spending.
JOE KERNEN: The -- you’re trending nationally. And some of your comments about the environmental -- 17-year-old environmental activist Greta Thunberg. I just would like to get -- you were joking about some comments but I think it’s a serious issue. And what I think is somewhat serious is that she has been elevated to a position whether it’s from "Time Magazine” or being finalist in the Noble Peace run. Whatever you want to call it, she’s here to great fanfare. Is that a commentary on anything, do you think about Davos or about where we are in the world in general, in terms of climate alarmism, et cetera?
TREASURY SEC STEVEN TERNER MNUCHIN: Well, let me just comment. Because obviously the climate issue is something that is being talked about this week. And I think quite frankly our environmental policies are misunderstood. The President absolutely believes in clean air and clean water. He supports a clean environment. He announced this week the support of the Trillion Tree Initiative, which will have an important impact on emissions. And what the President has said is he got out of the Paris Agreement, not because he doesn’t like the environment. but because it was a bad deal, it was unfair for the U.S. And if you look at the real environmental issues right now, they are in China., they are in India.
If you look at what the U.S. has been doing on its own, without government intervention, industry has gotten a lot more efficient on carbon emissions. And I just want to put this in perspective. Again, climate change is something that should be discussed. But there are a lot of other important issues. And I just put this in context obviously.
JOE KERNEN: But I think the President actually said the prophets of doom that have been proven wrong again and again in the past, referring to some of the alarmists that -- and we do see -- we’ve had -- I mean, long ago the ice caps were supposed to be melted by the year 2005. There was -- our children weren’t going to see any snow. The Malthusian bets have never paid off. So is the current--we have got a two-year or five-year window to prevent the total demise of civilization. I mean, do you believe that we’re that close?
TREASURY SECRETARY STEVEN TERNER MNUCHIN: No, I don’t believe we’re that close. And what I would just comment is there are a lot of other important issues. Obviously, this health issue and what’s going on. The potential of health issues spreading. Nuclear proliferation.
JOE KERNEN: Clean air. Particulate pollution. Clean water.
TREASURY SEC STEVEN TERNER MNUCHIN: If you look in the Middle East, the President has made very clear: Iran can never have a nuclear weapon. Nothing against the climate issue. That’s a much better risk, much bigger risk today. And I think that the youth needs to understand, climate is one issue that needs to be put in context with lots of other things.
ANDREW ROSS SORKIN: But let me ask you a question. We had Jamie Dimon sitting in the seat that you’re in right now just yesterday. He said that he was an advocate for a carbon tax with a dividend, for example. Satya Nadella last week announced a program that will cost that company material, real money, to produce a carbon negative corporation. Do you think that they are mistaken, if not worse, given the commentary the President and others have made?
STEVEN TERNER MNUCHIN: Look, I respect both of them in running of their businesses. I would say they have different policy views than we view. We don’t believe there should be carbon taxes. And we want to cut taxes. We think that industry can deal with this issue on its own, is dealing with this. And this is a worldwide issue that’s a much bigger problem outside of the U.S. than inside the U.S.
ANDREW ROSS SORKIN: The President said, though, he does not believe that carbon dioxide is ultimately the problem. And the thing that I was trying to understand is then he obviously signed on to this Trillion Tree Program. Why would he do that?
TREASURY SECRETARY STEVEN TERNER MNUCHIN: Well, again, it’s both correct. He doesn’t believe that’s the problem. On the other hand, obviously planting a trillion trees is a good thing for the planet. So, there’s no question.
ANDREW ROSS SORKIN: But if carbon is not a problem, you wouldn’t need to be planting the trees.
STEVEN TERNER MNUCHIN: First of all, trees are being cut down at paces all around. I mean, having forests, creating trees, these are all good things. But I go back to what you said, this is not the doom and gloom issue, okay, that is going to impact everybody in the next ten years. It is an issue that should be considered, along with a lot of important issues. The national security issues of what’s going on the Middle East and the President’s addressing this. Again, we’re much more focused on Iran not having nuclear weapons.
JOE KERNEN: Were you surprised at the tone in Davos? Did you come expecting a lot of the ESG stake holder discussions and instead it became more about the story of resurgent growth in the United States versus the rest of the world? It’s been more about that, hasn’t it?
TREASURY SEC STEVEN TERNER MNUCHIN: It really has. First, I would just say, we were very happy to have the President back here. It was a great opportunity for him to talk about the economic program we’ve had in the U.S and you also had the opportunity to see lots of CEOs, both Americans and Europeans, who were investing in the U.S. And there’s no question, the U.S. continues to be the bright spot of economic growth around the world. Europe, although it may have bottomed out, still looks slow. China still looks slow. And the President’s economic program is clearly working.
JOE KERNEN: Does the President talk to you about his plans for Europe and whether that’s going to be the next front in where we take a really hard line into certain unfair trade practices that we view are still in place against us in Europe? Are we going to push back hard?
TREASURY SECRETARY STEVEN TERNER MNUCHIN: Well, of course he talks to me.
JOE KERNEN: So, tell us. Because he said that and it got a lot of--
STEVEN TERNER MNUCHIN: The entire trade –
JOE KERNEN: Because he didn’t want to scare anyone that we’re definitely going to do anything. But, it sounded like they’ve been put on notice.
TREASURY SECRETARY STEVEN TERNER MNUCHIN: Well, the President has been very clear, okay, now that we have got USMCA done and now that we’ve got China, the president is focused on Europe. We had a good bi-lat this week with the EU. He also had an important meeting with the head of the WTO, where we talked about WTO reform. So, the President is very focused on trade. And he’s very focused on Europe. Now, the good news is we have seen a lot of investments in the U.S. from the European car companies. But the President wants to make sure that we have free and fair and reciprocal trade in Europe. And by the way, we’re very focused on a UK Free Trade Agreement which we hope to get done this year as well.
ANDREW ROSS SORKIN: I want to ask you briefly about our country’s relationship with Saudi Arabia and specifically in the past 48 hours these reports that MBS, the leader of that country, may have been personally responsible to some degree for hacking Jeff Bezos’ telephone. What do you make of those reports?
STEVEN TERNER MNUCHIN: I only know what I’ve read in the paper. I can’t comment.
ANDREW ROSS SORKIN: If true, how concerned would you be?
TREASURY SECRETARY STEVEN TERNER MNUCHIN: Again, I don’t really -- I don’t want to comment or speculate on--
JOE KERNEN: Well, which paper?
TREASURY SECRETARY STEVEN TERNER MNUCHIN: --what I read in the paper.
JOE KERNEN: Which paper? First, let’s get that out of the way.
ANDREW ROSS SORKIN: I think there’s a real question, by the way -- how about this, if you’re an American CEO today, should you be inclined to do business with Saudi Arabia?
STEVEN TERNER MNUCHIN: Absolutely. So, you know, we do a lot of business with Saudi Arabia. They’re obviously a big component of energy. We have an important defense relationship with Saudi. And that’s not going to change based upon one article in the paper. Again –
ANDREW ROSS SORKIN: But if that proved to be true –
STEVEN TERNER MNUCHIN: I’m not going to speculate on what ifs and everything else.
JOE KERNEN: This is -- ask him about the dollar. You support a strong dollar, Mr. Secretary?
TREASURY SECRETARY STEVEN TERNER MNUCHIN: I support a stable dollar.
BECKY QUICK: Mr. Secretary, let me ask you very quickly: you recently announced, I think just last week, we are going to be seeing 20-year bonds. I think a lot of people anticipating maybe see a 50-year bond. We talked to you about the very long-term things at one point. Does this mean we will not see a longer-term bond any time soon?
STEVEN TERNER MNUCHIN: No. Not necessarily. Again, this is something we studied carefully. There’s no question we want to look at expanding our borrowing capabilities. We’ve studied 50 and 100-year bonds very carefully. We actually got what I would say reverse inquiry on the 20-year. And when we looked at this, at least in the short-term, one, from a technology standpoint we can do the 20-year very quickly. It would take us a little longer to do the 50 and 100-year. And also, in terms of duration and proceeds, we can raise a lot more money in 20 years and 50 and 100. We can extend the duration more efficiently.
JOE KERNEN: I know you have got to run. The fiscal and monetary combination of where we are, craziest thing in history. Do you think it’s explainable in ways that doesn’t indicate we’re in some type of bubble?
TREASURY SECRETARY STEVEN TERNER MNUCHIN: I do. I mean, what I would say on a monetary basis, although U.S. interest rates look low by historical basis, relative to the rest of the world, they’re high. And the deficits reasonable relative to GDP. But we have to grow so that we shrink them over time.
ANDREW ROSS SORKIN: Always a pleasure to have you.
STEVEN TERNER MNUCHIN: Thank you.
ANDREW ROSS SORKIN Snowball during the commercial break. Thanks.