It has been about 48 hours since President Trump made a speech about his legislative attempt at tax reform in Missouri.
In that time, Trump’s surrogates — National Economic Council (NEC) head Gary Cohn and Treasury Secretary Steve Mnuchin — have given interviews about the plan as it is. Which is to say they have been interviewed about nothing.
Wall Street and the business community are losing their patience for this — and that became harshly evident this week when Mnuchin and Cohn appeared on the clubbiest of business media and got roasted.
I’m talking about CNBC, the network that breathlessly covered the “Trump rally” from that day after election day until… well, basically now.
The network whose anchors typically toe the party line when it comes to pro-business policy like tax cuts. Mnuchin and Cohn were interviewed on the network on Thursday and Friday respectively, and instead of the usual friendly reception, both were exposed for their lack of preparation.
Wake up Wall Street…
This is all for good reason. Mnuchin said earlier this year that there would be a tax deal on the table by August. It is now September 1 and we’re still basically hearing the same vague wish to bring corporate taxes down to 15% (unlikely) and platitudes about helping the middle class (unclear how).
Based on an interview with the Wall Street Journal, published Wednesday night, it seems Mnuchin is unclear on whether the White House or Congress or both or the infamous Gang of Six is writing the tax bill.
From the interview:
Although congressional committees will write the tax bill, Mr. Mnuchin indicated that the administration intends to stay engaged in the debate and stick to its goal of overhauling the tax code this year.
“In no way are we just turning this over to Congress,” he said, pushing back on published reports that the administration was ceding the next phase of work to legislators.
The following day Mnuchin was offered no quarter on CNBC, a network that used to have Trump call in regularly and wax philosophical on the issues of the day to the unwavering delight of its anchors.
Senior Economics reporter Steve Liesman threw a punch with his very first question.
“The President made a very impassioned plea yesterday for support for the tax package, but many on Wall Street are a little confused because there is no package. Can you explain to us why there is no package or details about rates and things like that coming from the White House?”
For the duration of the interview, Mnuchin dodged the same question phrased differently. He wouldn’t commit to a 15% corporate tax rate — one of the only numbers Trump mentioned on Wednesday. He wouldn’t commit to the tax package being revenue neutral. He talked about the bill being “socialised” in Congress, and rambled on about pulling “levers” and going through different scenarios.
Cohn didn’t do much better on Friday when he was confronted by three CNBC journalists, Sarah Eisen, David Faber and Michael Santoli.
He was forced not only to defend the existence of a plan, but also its viability in the legislature and its main — and perhaps only coherent — idea, that cutting taxes for corporations will translate into more jobs.
Cohn opened his argument saying that taxes should be simple, and that the government’s job is to make it so.
“Yeah, I know. Gary, I want to be 10 years younger and 6 inches taller but that doesn’t mean wishes always come true,” Faber responded. “I mean you’re going up against a Congress and a Senate that may disagree. You talk simplification, other some people will hear, well that actually means cuts, in particular for the highest end of the income bracket. That’s going to be tough to pass.”
CNBC is the channel of business, and as such most of its reporters toe the line of the party of business. Not today. Here’s Mike Santoli with his one and only question:
“How difficult is it, Gary, to sell the notion that putting a corporate tax cut, corporate tax simplification, at the centrepiece is going to translate into jobs? I mean the research isn’t all that great You have after tax profits of US companies already running near record highs and we have the job growth and wage growth that we have.”
Someone forgot their supply side handbook at home, apparently.
…there is no plan
CNBC, it should be noted, is not a leading indicator of Wall Street’s sentiments.
For the past few months as Mnuchin’s initial August deadline approached the mentions of tax reform in Wall Street research diminished.
This is in major contrast to what banks like Deutsche Bank were saying in January:
“The business background of many of the key members of President-elect Trump’s new cabinet makes it highly likely that there will be a strong and concerted emphasis on lifting the heavy regulatory burdens imposed on the US business sector by the outgoing administration. We expect quick progress in reforming the corporate tax system and in rationalizing the regulation of energy, finance, environment, healthcare, labour markets and the welfare system. These policies should help raise productivity enough to make higher growth rates sustainable in the long-term after the initial stimulus wears off.”
Barely anyone talks about it as reform anymore, it’s going to be a tax cut if anything and everyone knows that. And no one thinks anything that happens in this Congress will move “swiftly.”
That doesn’t make CNBC’s treatment of the Goldman guys any less telling. Faber went after Cohn for plugging Trump’s plan to give a tax holiday to companies that keep money off shore. Cohn was selling it as a solution, Faber pointed out that the last time we did that in 2004, corporations spent that money on stock buybacks, not hiring.
But Cohn was former COO of Goldman — a firm revered as near-legend on Wall Street. The anchors call him “Gary,” they have known him for so long.
It’s hard to imagine anyone on CNBC contradicting him so openly before this moment.
But these times are strange.
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