Tax-reform season should be Steve Mnuchin’s time to shine, but there are good reasons to doubt that the Treasury secretary is ready for the spotlight.
He will be a central figure as the administration starts to roll out the specifics of President Donald Trump’s tax plan next week, and then tries to sell the plan to Congress and the public. There hasn’t been significant tax reform in over 30 years, underscoring the difficulty of the challenge.
Mnuchin has had a rocky first eight months. He has issued confusing and contradictory statements about tax plans, made other verbal gaffes, and become embroiled in personal embarrassments. This is not the norm for a Treasury secretary, whose words and actions are watched carefully by financial markets and foreign governments.
The U.S. has had a remarkable collection of respected and successful Treasury secretaries from varied backgrounds. They’ve included titans of Wall Street like Robert Rubin (1995-1999) and Hank Paulson (2006-2009); government officials like George Shultz (1972-1974), James Baker (1985-1988) and Tim Geithner (2009-2013); and the economist Larry Summers (1999-2001). They’ve led the country through global debt crises, tax controversies and the financial meltdown of 2008. Their trademarks have been expertise, a knack for reassuring jittery markets and cautious discretion.
Mnuchin appears to have few of these credentials or qualities. He was an executive at Goldman Sachs, but never was a chief executive of the Wall Street giant like Rubin and or Paulson. He has no governing or political experience except as a campaign donor. He made a lot of money running a California residential mortgage lender, but it was reprimanded - by the Treasury! - for too aggressively foreclosing on homeowners.
He doesn’t appear especially conversant or comfortable with major government issues.
On tax reform, he has been all over the lot. Initially he declared that the wealthy will not get any “absolute tax cut.” Then he said maybe that won’t be so. He has vacillated on whether the administration will support a tax package that results in a loss of government revenue, and on whether the focus will be on cuts for corporations or individual taxpayers.
Sen. Ron Wyden, the senior Democrat on the tax-writing Finance Committee, was sharply critical when Mnuchin appeared before his committee in June. “You made a commitment that there would be no absolute tax cut for the wealthy,” the Oregon lawmaker noted, adding sarcastically, “So maybe it’ll happen, maybe it won’t.”
Privately, some congressional Republicans complain that Mnuchin has given ammunition to critics of whatever tax plan ends up being offered.
In June, Mnuchin told the Senate Budget Committee that “there could be a good shutdown” of government under some circumstances. That’s not unusual rhetoric for right-wing Republicans or a demagogic president, but it’s not normal fare from a Treasury secretary.
Mnuchin also boasted to a conference of investment professionals in May that “you should all thank me for your bank stocks doing better.”
That appalled Summers, who responded in his Financial Times blog:
“I cannot conceive of any of the 11 other secretaries I have known making such a statement. Leave aside the question of whether whatever credit is to be claimed should be done so on behalf of the president. Since when is the stock price of banks the objective or the standard of success for economic policy? And when, as will inevitably occur, bank stock prices decline, will Mr. Mnuchin accept the blame?”
Mnuchin also attracted personal controversy when he requested a government jet to take him on a European honeymoon with his bride. The Treasury’s inspector general’s office is investigating this request. Mnuchin, who eventually decided to fly commercially, said the initial request grew out of a need for “secure communications” given what he described as his key national security role.
He and his wife did use a government plane to fly last month to Kentucky, where the couple viewed the solar eclipse. Afterward, his wife used Instagram to show off the expensive outfits she wore on the trip and then quarreled online with a woman who criticized her for it.
Whether or not this sort of thing rises to a formal ethics problem, it’s not the type of behavior usually associated with Treasury chiefs, in whom discretion and caution are esteemed - even when taken to extremes.
Consider Rubin’s response when he was once asked by journalists to discuss some semi-controversial topic.
“May I go off the record?” he asked. The answer was yes.
“No comment,” he replied.
Albert Hunt is a Bloomberg View columnist. For more columns from Bloomberg View, visit http://www.bloomberg.com/view.