In some respects Steve Mnuchin is a typical nominee for the post of America’s treasury secretary. Like two of his past seven predecessors, and like his father and brother, he climbed the ranks at Goldman Sachs, an investment bank. In the 2000s he briefly worked for investor George Soros, who, on the eve of the election, featured alongside Goldman Sachs CEO Lloyd Blankfein as a target of a Donald Trump attack on the “global power structure.” As the news of Mnuchin’s nomination broke, he spoke soberly on CNBC of the need to reform the tax code.
In other ways, though, Mnuchin is an unconventional nominee. In recent years he has mostly swapped finance for films. His entertainment company, in partnership first with Twentieth Century Fox and later with Warner Bros, has produced blockbusters including “Avatar” (2009) and “Gravity” (2013). In his latest effort, “Rules Don’t Apply,” Warren Beatty’s romantic drama about 1950s Hollywood, Mnuchin even makes a cameo appearance—though that was not enough to stop it flopping over the Thanksgiving weekend.
If the Senate confirms his appointment, Mnuchin will face three main challenges in office.
The first will be to get Trump’s fiscal policy straight. During the campaign Trump proposed tax cuts that would, according to the Tax Foundation, a right-leaning think tank, give the top 1% of earners a tax cut worth, on average, between 12% and 20% of their incomes. However, Mnuchin told CNBC that there would be no net tax cut for the highest earners. Before the election Trump criticized his opponent’s plan for an infrastructure bank “controlled by politicians and bureaucrats” and proposed using tax credits to encourage private investment instead. Nonetheless, in mid-November Mnuchin suggested that the incoming administration is looking at starting an infrastructure bank after all.
The second challenge will be to live up to Trump’s promises on trade. Mnuchin is thought to share his boss’s protectionist instincts. He will determine trade policy alongside Wilbur Ross, Trump’s nominee for commerce secretary. Ross, a billionaire investor in bankrupt firms, is a vocal critic of recent trade deals. At the commerce department he will oversee trade enforcement, such as the imposition of tariffs. At the Treasury Mnuchin will have such responsibilities as declaring China a currency manipulator.
The final, overarching challenge will be to champion Trump’s growth agenda. Announcing the nominations, the transition team reiterated a promise to create more than 25 million jobs during the next decade—18 million more than is forecast today. Arithmetic suggests that this pledge is fanciful: Even if the labor-force participation of 25-to-54-year-olds returns to its record high, only 4.3 million new workers will appear by 2024.
To achieve their economic growth target of between 3.5% and 4%, Trump’s new team must instead hope for an unprecedented surge in productivity, perhaps driven by deregulation. More sober voices say that growth of 2.5% or, at a stretch, 3% should be the goal.
Assuming Mnuchin can achieve that, he will have to find a way to sell it as a promise fulfilled.
© 2016 Economist Newspaper Ltd., London (December 3). All rights reserved. Reprinted with permission.
Image credits: Ruth Fremson/The New York Times