Actually no. “Boom-let” is better.
While hardly as consequential as last week’s Trump WSJ interview in which the President did his best Erdogan impression by telling us all how, despite saying that Janet Yellen “should be ashamed of herself” for keeping rates too low last September, the White House is now squarely on board with something close to ZIRP, Treasury Secretary Steve Mnuchin is out in FT with a whole lot of “notable quotables” – so to speak.
Here’s the bullet point summary via Bloomberg:
MNUCHIN STILL EXPECTS THE TAX SYSTEM TO BE REFORMED IN ’17: FT
MNUCHIN: MAY BE WAYS TO RAISE $1TN W/OUT BORDER ADJUSTMENT: FT
MNUCHIN DEFENDS TRUMP NOT CALLING CHINA CURRENCY MANIPULATOR:FT
MNUCHIN TELLS FT ECONOMIC GROWTH EMPHASIZED OVER DEFICIT
MNUCHIN SAYS U.S. WILL PLACE MORE SANCTIONS ON NORTH KOREA: FT
MNUCHIN: U.S. INTENDS TO IMPOSE MORE SANCTIONS ON IRAN: FT
The market reaction was perceptible as the dollar pared losses incurred earlier in the session following the dip in Treasury yields occasioned by a delayed reaction to Friday’s CPI data.
To be sure, the interview isn’t exactly a ringing endorsement of dollar strength, but the bolded bits above – and in the interview excerpted below – will apparently do for now.
Here’s the full interview:
The US Treasury secretary has conceded that the administration’s timetable for ambitious tax reforms is set to slip following setbacks in negotiations with Congress over healthcare.
Steven Mnuchin said the target to get tax reforms through Congress and on President Donald Trump’s desk before August was “highly aggressive to not realistic at this point”.
“It started as [an] aggressive timeline,” the former Goldman Sachs banker said in an interview with the Financial Times. “It is fair to say it is probably delayed a bit because of the healthcare.”
Ahead of meetings with finance ministers and central bankers in Washington this week, Mr Mnuchin also rejected fears that the Trump administration may be embarking on a new round of currency wars over the strength of the dollar following the president’s public fretting last week.
He stressed that the US did not intervene in currency markets, saying: “The president was making a factual comment about the strength of the dollar in the short term . . . There’s a big difference between talk and action.”
Mr Mnuchin insisted he still expected the tax system to be reformed in 2017. But his words are a sign of the struggles Mr Trump has faced as he tries to overhaul Barack Obama’s healthcare system and ease corporate and personal income tax in the first year of his administration.
Mr Trump is embarking on a new push to overhaul healthcare after plans pushed by House speaker Paul Ryan foundered last month.
With the Republicans in charge of both branches of Congress as well as the presidency, Mr Trump’s officials have been locked in negotiations with GOP leaders on ways to make the US tax system simpler and more competitive.
Among the key sticking points is a “border adjusted” plan that would in effect tax imports while exempting exports. Senior administration officials have told the FT that the controversial measure is unlikely to survive — a development that would leave a $1tn hole in Republican tax plans over 10 years.
Mr Mnuchin said there may be other ways of raising $1tn without incorporating the border adjustment, saying the measure was just one of many elements being examined by a 100-strong Treasury team. “That is not to say we have taken it off the table,” Mr Mnuchin said of the border adjustment.
Asked how the administration would ensure tax reforms were deficit-neutral, Mr Mnuchin stressed how potent a higher growth outlook would be in generating revenue. He said that there could be a difference of close to $2tn in revenues under different economic scenarios, adding that the difference between growth of 1.8 per cent and 3 per cent was “staggering” when compounded.
“Economic growth creates lots of revenues,” he said. “When you calculate whether it is deficit-neutral or not, there are a bunch of different calculations and a bunch of models. I am just pointing out the magnitude of what economic growth does.”
Mr Mnuchin rebuffed suggestions that Washington may be seeking to depreciate the currency via verbal interventions following remarks from Mr Trump last week. “As the world’s currency, the primary reserve currency, I think that over long periods of time the strength of the dollar is a good thing,” said Mr Mnuchin. “It’s a function of the confidence and the strength of the US economy.”
He agreed with the president’s repeated comments in recent months that the dollar’s strength in the short term was hurting US exports and the economy. “The president’s comment — which again I agree with — is that over short periods of time the strength of the dollar creates certain issues that hurt our exports. I think that is what he has referred to, which is again factually correct.”
The Treasury secretary also defended the president’s decision to reverse a campaign promise to label China a currency manipulator and said the US would apply extra vigilance to other countries’ behaviour.
“The president’s comments during the campaign reflected previous periods of time,” he said, pointing to “the combination of the facts and the combination of what the president said and how China is working with us” as the justification for the change in rhetoric. Mr Mnuchin said the Trump administration viewed sanctions as a critical tool as he revealed that Treasury was poised to impose more than 200 sanctions on Syria after the recent gas attack that sparked a US missile strike on Syria. He said the sanctions would be unveiled over the next two weeks and would target individuals and entities.
“This is an important part of what we are doing,” he said. “They are in the process of being cleared to roll out.”
Mr Mnuchin also said the US would place more sanctions on North Korea, which breached UN resolutions on Sunday with a failed missile launch, but explained that it would be “more of a rolling process”.
He said the US was also keeping close tabs on Iran, and that it intended to slap more sanctions — unrelated to Iran’s nuclear programme — on the country. “These sanctions programmes are extremely important. It is one of the most important parts of my job,” Mr Mnuchin said.