Steven Mnuchin's Deal Staved Off Catastrophe. Can He Make Another One? - Press "Enter" to skip to content

Steven Mnuchin’s Deal Staved Off Catastrophe. Can He Make Another One?

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But in the course of pleasing his boss, Mnuchin has also crossed lines that past Treasury secretaries have tended to avoid. When the administration proposed a $1.5 trillion tax cut in September 2017, Mnuchin publicly promised that “not only will this tax plan pay for itself, but it will pay down debt.” This was a contentious claim, and Mnuchin pledged that career economists in the department’s Office of Tax Policy were “working around the clock” on a detailed analysis that would support it. At the same time, the department removed from its website a 2012 Office of Tax Policy study that contradicted Mnuchin’s assertion that corporate tax cuts would most benefit workers.

The pressure on Mnuchin to substantiate his claim increased after Congress’s Joint Committee on Taxation concluded in late November that the legislation, while growing the economy somewhat, would still cost about $1 trillion. But, ultimately, the Office of Tax Policy failed to produce the promised detailed report. Instead, the Treasury Department in early December released a one-page analysis of the nearly 500-page bill that suggested the law would be revenue-neutral, assuming the economy grows significantly faster — for reasons unrelated to the legislation — than any independent analysis of the bill had projected.

After the bill passed the House and Senate, the Congressional Budget Office released its analysis of the new law, projecting that it would lead to a $1.9-trillion increase in the deficit by 2028. Mnuchin, however, continued to insist that the tax cuts would pay for themselves, only recently acknowledging at last that they won’t. “Unfortunately,” he told me in July, “we ran into corona.”

As late as mid-March, when Anthony Fauci, the federal government’s top infectious-disease official, was considering calling for a nationwide lockdown, Mnuchin was encouraging Americans to travel on airplanes. “If I weren’t so busy working, I would be going home to Los Angeles, and I would be perfectly comfortable getting on a commercial plane this weekend,” he said on March 13. Nevertheless, around the same time, he began pressing Trump and Republicans in Congress, both of whom were wary of doing anything to spook the stock market, to take significant steps to combat the pandemic’s economic impact.

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Trump initially pushed a recovery plan whose centerpiece was a payroll-tax cut. Mnuchin, according to administration officials, prevailed upon Trump to drop the tax cut and go for a giant stimulus package. “If we were going into war, you wouldn’t say, ‘How much is it going to cost to win?’” Mnuchin says. “You’d say, ‘We’re going to win, and we’re going to do whatever it takes.’”

Some Senate Republicans balked at the initial $1 trillion price tag, which would eventually climb to $2.2 trillion. At a Senate Republican lunch, Mnuchin tried to scare them straight by telling them that if Congress didn’t pass the stimulus, unemployment could go as high as 25 percent. “It was just math,” Mnuchin says.

One of Mnuchin’s two most reliable partners in the push for coronavirus relief was Nancy Pelosi, with whom he had successfully negotiated a two-year debt ceiling and budget deal in 2019. “Mnuchin is factual and straightforward and wants to get something done and isn’t partisan or ideological,” says a senior Democratic House aide. In the course of putting together the economic rescue package, Mnuchin and Pelosi would speak on the phone as many as 18 times a day. Mnuchin, meanwhile, set up shop in a Senate office that once belonged to Lyndon Johnson as he hammered out the key provisions that would make up the CARES Act. “He’s very smart and he works hard,” Kudlow says. Senator Mike Crapo, an Idaho Republican, says, “He was the one doing a lot of the negotiating between the House and the Senate and the White House.”


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