Former US Treasury Secretary Steve Mnuchin Talks Strength of the Dollar

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I want to get right now to former Treasury Secretary Steve Manuchin sitting down with David Rubinstein here at the invest conference.

If you want, let's.

Listen in something I like the idea of the ten percent tariff across the board. It's a consumption tax on foreign goods. But if you were to do that, he should do that through the reconciliation process so that can be scored.

I think would raise about two and a.

Half trillion dollars and could be used to pay for tax cuts.

As an example.

Speaking of tax cuts, you engineered with President Trump the very large tax cut of his first term. Do you think a similar sized tax cut is essential now?

Well, the biggest focus for them is just extending the personal side of the tax cuts, which which are going to expire.

And I think.

That that was a signature part of his first term and I think that's got to be the priority to continue now. On top of that, I know he wants to do additional tax cuts, and that'll be a little bit more challenging with the pay force.

Or then the campaign, he talked about a couple other tax cuts.

One is no tax on tips.

Are people getting tips actually paying a lot of taxes?

I don't know.

I mean cash they're getting out today, I don't know how much they're paying, And maybe they're paying a lot of tax Is that a big source of revenue? If you are loss of revenue if you don't have tax on tips, well.

You know we're not in as much as a cash society as we used to do. So there's a lot of tips that go through an electronic mechanism. I think if he wants to have a small carve out for tax on tips.

I think that makes sense.

I think obviously, if you start giving tips to investment bankers at the end of the year instead of bonuses and they don't get taxed, that would be.

A little bit more problematic.

And you know, you could tax your lawyers, and so I think if he does that, it needs to have a small carve out.

In the campaign, he also talked about I think no tax on Social Security. Wouldn't that be pretty expensive? Very expensive? And no tax on overtime too. I think he talked about does that be expensive too? It would be okay. So when you were working on the tax cut, when you were Secretary of Trategy, how did you find the intellectual level of the Ways and Means Committee members where they really everyone understand everything you guys wanted to do.

Well, I mean, there's no question, you know, when we passed the tax cuts, and this was a lot of work, we were very engaged with both the House and Senate, and actually we had weekly meetings which was called the Big Six. It was me and Gary Cohne from the White House, it was the Senate, and it was the House. And literally every week we sat down and went through details. So I mean, as you know, I mean, we had sweeping tax reform across everything. This time it is actually

In recent decades, the annual deficit has been fairly high. I think under President Trump's first four years, I.

Don't know exactly.

I think it was maybe six to eight trillion dollars of additional debt added to the total debt. We have that thirty six trillion. Now, how are we going to get the debt down? And the deficit down if we have these big tax cuts.

Well, David, let me just say I think the deficit is probably the most important issue today in terms of the long term impact on the economy. And just to put this in perspective, in the first term, we had debt to GDP ratio of about one hundred percent, and with the tax cuts and the economic growth before COVID, we were growing the economy faster than we were growing the debt, so that ratio would have come down, and I think we were trying to get it down to

When Bob Rubin was Secretary of the Treasury, he once talked about the value of the dollar, and he made a mistake, he later would say, by talking about saying something other than we want a strong dollar. And now every Treasury secretary is told you can only say one thing about the dollar, we want a strong dollar. But what can former secretaries and Treasury say about that? Can

Well, you know, it's funny that you say that, And Bob really was kind of credited with the strong dollar policy, and I think it's kind of every Treasury secretary after that kind of you know, you got Treasury one oh one training, and the first thing they told you was just talk about a strong dollar. You know, actually, when I was at Davos, I made a comment that I come into it on a balanced, stable dollar as opposed to saying a strong dollar, and all of a sudden,

But I think the most important thing.

Is actually a stable dollar so that there's not volatility.

Speaking of stable, what do you think about the Secretary of Treasury or the US government supporting cryptocurrencies. They didn't really have them so much when you were Secretary of Treasury, but now cryptocurrencies seem to be very heavily supported by President Trump and his administration.

Do you have any comment on whether that's a good or bad thing.

Look, my view on crypto has been pretty consistent. We did a lot of work on this in the first term. If people want to buy crypto as an asset class like they buy gold, that's fine. I personally don't wouldn't invest in it, but that's fine to me. The bigger issue has been making sure that crypto is not used

You know, in the business world, investment world, if you hire more fundraisers, you usually raise more money. In the IRS world, if you get more agents, you usually raise more money.

But for some reason, the.

Republican Party seems to want to have fewer agents, and therefore they reduce the number of agents, and therefore maybe they're not going to raise as much money. Do you have a view on whether cutting back the IRS agents that were put in under a President Biden is a good thing to do or not.

Well, I have a strong view on this. I spent a lot of time overseeing the IRS. I mean, the reason why Biden administration added so many agents, this is the silly part of government math.

So if they added all these agents.

They were able to score it that they were going to able to raise revenue in the future, sure, and they spend that revenue today. So I actually don't think we need more agents. What we need is a bigger investment in technology in the irs.

The systems are outdated.

And I think in this day and age, there's a lot we can do with technology that we don't need physical agents auditing people. It can be done electronically.

Now, is it possible for the DOOSE people to get the individual tax returns of a particular person to who they might not like or that's pretty impossible to do, well.

It's not allowed.

So the people are not allowed to get individual taxpayer information. My understanding is that they can get access to anonymized information. Again, I think it's it would be helpful for those to help look at modernizing the technology. But obviously, you know, looking at specific taxpayer information should not be allowed and isn't allowed now.

President Trump and his administration are very focused on the trade deficit, which is very, very high these days. But is the trade deficit that big a problem compared to the budget deficit? If you were to worry about which deficit, wouldn't be budget deficit be more important than a trade deficit.

Well, as you said, we have what's called the twin deficits. In my opinion, the budget deficit at two trillion dollars annually is a much bigger problem.

And I think, by the way, if you brought.

Down the budget deficit, by definition, you'd bring down the trade deficit because you'd have less demand for goods in general. And I do think the idea of resetting trade relationships. I mean, President Trump is right that the US market has been opened for foreign trade, and foreign markets have not been opened in the same way. You know, we spent a lot of time with China on the Phase

Now, President Trump has made a big push on getting American companies and foreign companies to invest in the United States manufacture things that would probably be somewhat inflationary because by definition, if you have people producing things overseas, probably because it's the lowest cost producer. If you bring them back to the United States with higher labor costs, it'll

Well, I definitely think US manufacturing jobs has always been a big focus of his. I think you know, there was a large part of the economy that was left behind, and I.

Do think that's a focus now.

Obviously, there are different markets that can be competitive, so I think we can have the same thing, but his focus should be US investment.

So when you became a Secretary of Treasury, there was somebody on the Federal Reserve Board who had been appointed by Obama, James J. Powell, who used to work at my firm, and then you recommended him to President Trump, I think, to be the chairman of the Federal Reserve. President Trump was not happy with him at the beginning, I guess, but I think he's going to keep him now. I guess any regrets about recommending J. Powe or how kind of job you think he's done.

Well, let me first say, despite the fact that Obama did appoint him, Jay was a Republican and is a Republican. I had the opportunity to work with him really on a lot of the regulatory issues at first when Jenny Allen was chair and I do think Jay's done a very good job.

You know.

As President Trump, he had a bunch of issues with him raising rates. But then during COVID he did give him the Most Improved Player Award when he dropped trades down to zero at the time.

So it generally the President of United States is not supposed to talk to or lobby the Chairman of the Fed, but the Secretary of treasurer usually meets regularly with the Chairman of the Fed. They kind of talk about things to some extent. Did you meet with him fairly regularly and how would those conversations go when you met with j Powe?

I did?

I mean we inherited a tradition which has been kept up is that the Secretary of the Treasury and the Chairman of the Fed meet weekly. It alternates every week between being at the Treasury and the FED. And I found those meetings very helpful. I mean a big focus was obviously what we were doing on regulation monetary policy. I never talked about monetary policy publicly, but yes, of course,

So today, if you were J. Powe, would you lower interest rates in the next six months or so?

I think it's pretty clear the FED is going to lower rates. So I mean, if you look at the dot plot, which is what the FED governors have publicly said, you do see rates coming down to about three in a quarter, and you see the long term rate at about two point eight. I do think the long term rate between being closer to two and a half than three, and I think we're going to see rates lowered next year. And by the way, I think the ten year has

So if President Trump were to call you and say I need to have a new chairman of that FED in May of twenty six, who would you recommend.

Well, I have a bunch of ideas, but I'm not going to say that publicly.

I would say that privately to.

Okay, So let's go to the next subject then, more important than the policy of the economic policy of the United States government is a subject called private equity. So you left Secretary of Treasury and you start a private equity firm, Liberty Strategic Capital. So is private equity as fulfilling as you thought? I know you were in it a bit before you became Secretary Treasury, But how do you enjoy the private equity world?

Well, David, you know, I've been in the investment business and the markets businesses now for forty years, and I think kind of every job I did kind of prepared me more for the future. And when I became Treasury as secretary, I think it was helpful that I had a background in markets and risk. I had a background I had been CEO of a bank.

So that you know, I understood a lot of these issues.

You know, we're small enough that we focus on a handful of investments. We've done about ten investments to date. And you know, I find it very interesting.

You agree with my view that the highest calling of mankind is private equity.

I do not. You don't think so there's something more important, but I don't know what it is. But okay, I.

Would have thought you were going to tell me the highest calling was to own a baseball team if.

It's a winning team.

Yes, But so let me ask you, when you your Secretary of Treasury and you know, you're a very powerful person, and then when you're on the private sector, you're going and asking people for money who used to ask you for, you know, information about what's going on. What is it like to kind of make that switch to kind of asking people for money who used to ask you for not favors but more information or help.

No, I mean, I mean, first of all, fortunately we're we're not in the fundraising business.

And you raised for your first fund about four billion plus or something.

Well I can't comment on the size of it and things like that, but yes, we did raise our fund. But you know what I find interesting now is actually it's it's you know, when your Treasury secretary, and it's extraordinary experience. But you can't publicly talk about a lot of things, and there's limitations on what you can do. So I find it actually quite interesting being involved in different things now from the outside.

Well, one of the pleasures of being Secretary of the Treasury is you get your handwriting on the dollar bill something like that. So some Secretary of Treasures had incomprehensible, indecipherable handwritings, and they couldn't figure out who actually was finding it. But what was the pleasure like of getting a bills one hundred dollar bills or dollar bills and having your.

Signature on it? Was that fun or not?

You know, David, I changed my signature because my signature was completely illegible, okay, And I thought, if I'm going to have my signature on the money forever, it would be nice if you could see it and read it.

So I simplified my signature a lot.

I guess the question is is you know, I wonder if President Trump wants his signature on the money.

By the way, I have a similar problem, don't. I can't do cursive because I think that was being taught in the second grade when it was Jewish holidays and I wasn't in school, so I can't really like cursive.

So I don't have to worry about this. I'm not gonna be Secretary and Treasury.

But there is a proposal now to have a two hundred and fifty dollars bill, a law of bills proposing Congress with President Trump's picture on it. Usually you're supposed to have passed away before you get your picture on it.

But ye, many comment on that, or well.

My only comment is, why would he pick two fifty. Let's go for a thousand if they're going to pass the law.

Okay, Well, when you were Treasuring secretary, you did work on I think having a woman on the dollar bill. Was it the twenty dollars bill or or something. It was going to be somebody, but it took years to get it done. It hasn't happened yet. You actually think there will be a woman on the dollar bill in our lifetime?

Well, David, you know what I was focused on, and I knew it wasn't going to be my decision. It was going to pass over. I don't know if it'll be Scott Besson's or not. But what we were very focused on the time is the issue around the dollar and so that you couldn't replicate it, and the security features of the dollar. And there are changes that I can talk about that are in the works around the printing, so that takes time, and that's the most important part of the change.

Now.

One of the most important parts of the Treasury Code i RS code is something called carried interest taxation. You're probably familiar with that. I've heard about it a few time times. I heard about it during the first I know, I talked to you about it maybe a few times. I don't remember exactly. But President Trump has never been

I don't know exactly what they are.

But so do you have a view on carried interest now that you were in the private ecuy world. Do you think we should preserve it or not preserve it or you don't want to comment on it. Well, David, there's going.

To be a lot of pay fors in have to be in the tax code, and they're going to look at a lot of different things. I will say, first of all, in the carried interest it doesn't raise a lot of revenue. I mean, look, one of the issues, as you know, on carried interest is if you have two investors and we invested you know, fifty percent, you invested fifty percent, we'd need to pay a.

Certain amount to tax to the extent in it.

You create a fund and we decide as opposed to it being fifty to fifty, we're going to exchange profits. It doesn't change the tax that the government collects. So I think from an academic standpoint, you know there's a reason behind this.

From a revenue.

Standpoint, that'll have to be something that Congress looks at.

So what is the biggest pleasure you've gotten out of having a private equity fund? Now you raised the fund, You've made a number of investments. Are you enjoying us as much as being Secretary treasurer or being a partner at Goldman Sachs or not as much?

I mean, David, all these experiences were really extraordinary. I mean, what I find interesting about this is investing in businesses and being able to impact certain businesses. You know, I've had a long experience in banking. We made a big investment that we bailed out and saved what was a Flagstar bank. It was called New York Munity Bank at the time. And you know, banking is something that's been very interesting to me. So this is the second time

Indie BFD, I see Indie Bank Bank.

Okay, So what are the areas you're focused on? Is the financial services? Cyber what of.

The area technology and financial services are to major focus?

Okay?

And entertainment you did a lot of that when you were before you were Secretary Treagery.

Doing any of those kind of innesement. We do a little bit of it.

I mean we've been, you know, big investors over time in content. When I was investing in movies, it was more actually a technology play and understanding bandwidth to the home and the demand for content.

Hey, so today when people invest in private equity, the kind of rates of return they expect are probably lower than they were twenty years ago when more leverage was used and whole writing of other things. But you think somebody investing in private equity today with a reputable firm should get a rate of return in the load of mid teens.

Something like that, a little bit higher higher than that. Yes, with you, well, I can't comment on me, but i'd say I would say in just mid to higher teams. Yes, okay.

And today, in your view, is Congress likely to deal with the budget deficit in a way where we won't have to deal with the government shutting down, and do you think that's a real risk that the government could shut down again?

Look, I'd say, you know, there's two issues that again that I spent a lot of time on, both the debt ceiling in government funding and you know the issue here and you know the government. So as treasury, we could have the money and not be able to spend it because of government funding, or we could have the government funding but not have enough money because.

Of the dead ceiling.

My major focus was the debt ceiling, and one of the things I think now is the most important issue is the Republicans need to get the dead ceiling into a reconciliation quickly and raise the dead ceiling.

In nineteen seventeen, the death ceiling was first imposed, and we've now raised it more than ninety times. President Trump has said before we should get rid of the dead ceiling, and we're the only country in the world with one other than Denmark. So what is your view on do we need a dead ceiling because we can we changed it all the time anyway, or should we just keep the death ceiling.

Well, given the side of the debt that we have today and the focus on the debt, I would keep the dead ceiling. I think it's an important mechanism. It's become too political. But I think spending and the dead ceiling should be passed at the same time. So whenever Congress passes whatever the spending is, they should simultaneously pass the dead ceiling so that you can afford to pay for that. But I don't think, you know, unlimited spending is a good thing. As I mentioned earlier, you know COVID,

Now.

Many countries around the world have something called a sovereign wealth fund, and the United States doesn't have that. We have the printing press, we print dollars and people buy those dollars, but we don't have a sovereign wealth fund. President Trump has signed an executive order I think, creating a sovereign wealth fund. But where will the money come from for that sovereign wealth fund?

Well, David, as you know, most countries that have sovereign wealth funds are because they have certain resources today that are going to be limited. Obviously, oil and energy is a big focus and the purpose of the sovereign Wealth Fund is to capture a huge amount of those revenues today so that it can be spent over generations.

The US is not in that situation.

So if we're going to have a sovereign wealth fund, I think obviously we'd have to borrow to put the money in the sovereign wealth fund since we don't have a surplus. And if we did that, I think you should be very limited in scope. For are there certain areas that we need government support. It shouldn't be used, obviously to crowd out private investments.

The third rail of American politics was thought to be the social security system and medicare. Some people say, ultimately we were running out of money to fund the social security system because people are living longer and so forth, and we have more people retiring and then living longer. Are you worried about the security of the subsecurity.

System, David, One of the big titles I had in government was managing Trustee of the Social Security Trust Fund. And when I got there, I thought I actually could do a lot of good. And one of the things I was actually very focused on. Social Security still has paper cards, and I thought one of the most ridiculous thing is the Social Security number is the identifier most people use. I wanted to focus on creating electronic ID and I think that's still something we should do now.

In the second half of this term, he might have a different House of Representatives. Historically, the first midterm election a president usually loses about twenty five seats in the House. There's no evidence in what will happen now, but if President Trump were to lose control of the House, do you think that would affect his agenda great deal in terms of sociecurity reform other things, And therefore he needs to get everything done in the first two years that he really wants to get done well.

First of all, as you know, the House with a very small majority in the House, So yes, I do think for the first two years, he has to focus on what are the most important legislative agendas. Obviously, border security something he's very focused on. I know there's been this talk of one bill or two bills. Personally, I would do two bills. I think he can have a very quick win on border security and get that done

You're not going to want to attack that.

Now that's something so it doesn't matter who controls Congress for that.

You know, a bus mark. I think it used to said that there's two things you don't want to see being made are sausage and legislation. And what is it like when you're doing tax bills. You're sitting in a smoke filled room and you're sitting there with the members of Congress and they say I'll give you this and you give me this, And how.

Does that really work? Is a trade offs er?

Everybody says, we just have to do what's best for the American peer people, and we're not going to do any trade offs or deals.

Well, first of all, there are no smoke filled rooms. That may have happened in the past, but at least when I was there, nobody was smoking. No, I think that you know it said, you know, we worked very closely with the House and Senate. These are huge complicated issues. Of course there have to be trade offs. You have

So if you were king for today and you can make any change in the way the economy, the finance structured the United States is based, the spending is done. What would be the one thing that you think we should do to make our economy better or make our financial system better than it is today.

One thing, I would reform.

The spending process and the debt sealing process so that there was a real process of the administration having a budget, that budget going through Congress every year, and that kind of the focus around spending.

Okay, so for the time being, you're going to be in the private sector, you're not going to be drafted back in the government, and you're happy with the highest calling of mankind that you're now pursuing private equity.

Right the highest calling was serving the people in the environment. I know you think this is the highest time, David. I know you've been terrific in advising and helping presidents, and I'm sure you'll also give President Trump a bunch of advice.

Well, I don't know if he needs my advice. Certainly not on the Kenney Center, probably, but we'll see. Okay, Okay, I think we're out of time. So we're out of time, right, Okay, see, thank you very much, thank you,