President Trump’s tax-reform rollout came stumbling out of the gate this week. And much of the blame belongs to the clumsy, hacky salesmanship of Treasury Secretary Steven Mnuchin and National Economic Council Chairman Gary Cohn, who fumfered his way through an awkward White House press briefing. When asked if he could be sure no middle-class American would get a tax increase, Cohn said, “I can’t guarantee anything.”
On the one hand, sending out two men who used to work at Goldman Sachs to sell a plan designed to massively cut taxes on the wealthy might seem ill-advised. But the problem, I’d argue, isn’t that they worked at Goldman. It’s that neither of them actually ran Goldman Sachs as CEO—unlike Robert Rubin (who served as NEC Chairman and Treasury Secretary under Clinton) and Hank Paulson (Treasury Secretary under Bush). Those guys knew how to sell a policy. These guys do not.
This may seem like a distinction without a difference, but it is meaningful. When you’re CEO of Goldman Sachs or any other major Wall Street bank, you have to be an economic and industrial statesman. You develop a certain comfort talking to the public. On investor calls, on CNBC, with journalists, you’re forced to think on your feet and interact with skeptics. You appear on panels at the Aspen Ideas Festival, the Peterson Institute, and the World Economic Forum. There may even be people on those panels who challenge you and say you’re wrong. You have to be conversant in the intricacies of policies—and understand the ways policies are discussed. You have to nod sagely and at least fake some noblesse oblige when the conversation turns to climate change, diversity, and poverty in the developing world.
Sure, there is a lot of BS in all of these forums, but participating in them actually forces CEOs to develop certain muscles that their underlings don’t have to. Neither Mnuchin nor Cohn has that experience.
They were enormously successful at Goldman (and, in Mnuchin’s case, Hollywood).
But they thrived largely as behind-the-scenes dealmakers, traders, and producers, not as leaders. Each has managed to make it well into his 50s without having thought deeply about policy, without talking to a hostile press, without having to publicly negotiate with critics. To a degree, Mnuchin and Cohn simply don’t know how to carry themselves on the public stages onto which they’ve been thrust.
Now, there is a language a reasonable person might use to talk about why cutting taxes on capital and income is a good idea, and why eliminating certain deductions might be a positive. (You might listen to someone who served in the Bush administration, like Greg Mankiw of Harvard.) And, if you’re insanely rich yourself, it helps to do so with a degree of self-awareness.
But Gary Cohn doesn’t know that language. And so he speaks about taxes and incentives the way senior people at Goldman speak to one another about taxes and incentives. He makes the subtext text. Defending the abolition of the estate tax (which actually only helps really rich people), he argued that rich people don’t pay the estate tax because they can finagle their way out of it through trusts and the like. (I mean, that’s part of the point of being a private banking client at Goldman.) Defending the potential erasure of a chunk of the mortgage deduction, he said that people don’t make home purchases based on the mortgage deduction. Which, again, is entirely true at the upper echelons of Goldman. You can only deduct the interest on the first million dollars of debt. So if you’re buying a $10 million co-op or an $8 million summer house in the Hamptons, the deduction actually doesn’t really matter.
When describing how middle-class people would benefit, Cohn noted that a typical household making $100,000 (about twice the actual median income) would get a $1,000 tax cut, enough to buy a car or renovate a kitchen. Which, no. And when a reporter asked him precisely how it would cut taxes on the middle class, he responded the way he would to a junior banker questioning a deal: “I told you that it would.” And so on.
Steve Mnuchin is, if anything, simultaneously slicker and more callow than Cohn. It’s clear he hasn’t thought or written or spoken much about tax policy and economics in his professional life. And so he routinely pulls things out of his rear. He promised Congress in February that tax reform wouldn’t benefit the rich. Now that’s just an objective. He said the tax cut would more than offset set its cost and reduce the debt because it would stimulate 10 years of growth at 2.9 percent. Nobody actually believes that.
Mnuchin insisted that a corporate tax cut would lead to higher wages, since workers bear the cost of corporate taxes. “Most economists believe that over 70 percent of corporate taxes are paid for by workers,” he said.
At the same time, a Treasury paper that concluded that, actually, labor only winds up paying 18 percent of corporate taxes was removed from the department’s website. (Like nobody would notice?)
It’s a little like someone who’s played some softball stepping into the batter’s box against a major league pitcher in a huge stadium. They swing and miss, and look clumsy doing so. And then they step back in the batter’s box again.