Correspondents on the 2016 president ial campaign and the first few months of the trump presidency. Cohosted by atlantic magazine and the aspen institute, this is just over an hour. Were going to get to tax reform because thats a very big issue set in motion by the president yesterday. I want to talk about a couple of issues that are also related to the Treasury Department because they are an important part of what you do and what the country is trying to achieve. Specifically with north korea. David petraeus on the stage saying he and others discouraged by trade numbers indicating china is trading with north korea. New sanctions were applied last week. What is your level of confidence those sanctions will change materially the chinese behavior . Can you clarify, because theres been different reporting about this, what exactly chinese banks are doing Going Forward with north korea. Thank you for bringing that up. Its an important topic. I did have the opportunity to go with the president to the u. N. General Assembly Last week. It was an incredible experience sitting in the General Assembly and listening to his speech. He also signed last week in new york an executive order which gives the Treasury Department the most extensive powers on sanctions that weve ever had. Specifically it allows us at treasury to sanction any Financial Institution or otherentity that does any trade or facilitates any trade on goforward basis with north korea. So these are very important powers. Well be careful in using them but we think they are going to have a very big impact. I emphasize thats on a Going Forward basis. Have they been exercised yet . They havent. Okay. We did have sanctions this week that was additional sanctions that were allowed to do under the executive order. As it relates to Financial Institutions, as ive told my counterparts, it will be on a go forward basis. Obviously were concerned about historical activity. Were monitoring go forward activity and having ongoing discussion. So we think this will have a big impact. Central bank of china is or is not Going Forward doing financial business with north korea . Again, ive had very direct conversations with the governor. I dont want to comment on all the specifics, but they understand. The president has said they wont. Again, they came out and made a representation as to what they do and what they wont do. We hope and executive they will follow through on that. Are you discouraged as general petraeus said he was, by the trade numbers . Im not discouraged by anything. I think this president has taken a very different position. I think for too long this has been an issue thats just continued. Weve watched it. I think the president made very clear that the activities with north korea are unacceptable, threats of Hydrogen Bombs being tested over the pacific are completely unacceptable, and our objective is to denuclearize the peninsula. I want to ask you before we get to tax reform about something you said in the springtime about your role in relationship to the u. S. Economy. And you were asked a question about Artificial Intelligence and automation. Yes. You said its not even on my radar screen. The reason i bring this up, the company i used to work for, Goldman Sachs put our Research Paper describing the Apex Technology of 21st century American Economy meaning it is something here and now. Did you or have you reevaluated that sense of the importance of automation or Artificial Intelligence in terms of where the u. S. Economy is going and how policy ought to be shaped to deal with it. I hate to accuse the fake news of doing things, but this is one of the times where my quote was misrepresented. So they didnt say the entire context what i said was technology is having an impact in the workforce. I specifically think robotics and i commented at the time robotics are an important. Its a positive thing. They are taking over jobs, not necessarily jobs human beings need to do. What i was referring to was Artificial Intelligence. I specifically referenced r2d2 for star wars fans out there. Its going to be a long time before pure Artificial Intelligence takes over. Thats not and wasnt on my radar screen. That wasnt referencing robotics, cars, technology is here and having a very big impact. How does what the president introduced yesterday, what Congressional Republicans embraced largely though not completely relevant to technology and preparing the American Economy for the 21st century challenges. I think what yesterday was about and tax reform, whats important is that we make American Business competitive. Right now independence of technology issues, by the way, weve been a leader in technology for long periods of time and advances. Independent of that we have one of the highest business tax rates in the world. We tax on worldwide income, which virtually no one else does. We have deferral. Not a surprise, billions of dollars offshore. What the president talked about yesterday is hes focused on Economic Growth. To get Economic Growth we need Business Tax Reform for corporate and passthroughs, middle income tax cut. The impact of your tax reform plan could bring domestic growth, gdp to 6 . Are you that optimistic . That is optimistic. Is that built into the framework for paying for itself . What we scored it to and will score it to 2. 9 gdp over 10 years, scaling up to 3 . We think thats very, very doable. We think we can do higher than that. But if we get to the 3 , as i mentioned, 2. 9 over 10 years, thats 2 trillion of additional revenues. Thats 10 trillion of economic activity. Not only will this tax plan pay for itself but it will pay down debt. That pay for itself comes from that projected Economic Growth. Thats correct. Youre 2 trillion short even when you look at pay fors in the details released so far, at least according to the committee. I dont think those numbers are right. I think what were trying to achieve is achieve is 1. 5 trillion static. But that i would describe versus baseline. Theres about 500 billion between baseline and policy. To the extent we have a policy and were rolling it over every year, i think its the right thing to look at. If we get those 2 trillion, that means we go 1 trillion positive in paying down the debt. As you approach this audience and the country generally on the issue, your position is dont worry about the deficit, there will be no deficit implications if this tax reform plan is signed into law. Id say it slightly differently. We should worry about debt. We need to continue Economic Growth. We think our projections are reasonable. 2. 9 is a reasonable number to project this too. The Corporate Tax rate is 35 . There are many studies that say the effective average Corporate Tax rate is about 24 . Cutting it to 20 , how much difference would that really make and is it worth giving up that revenue for a 4 deferential . Thats your argument of why we need tax reform and cuts, because people spend so much time trying to figure out how to get around paying a very very high tax rate and they dont pay it anyway. This is about broadening the tax base and making it fairer. [ applause ]. Thank you. When you talk about rates, 12 , 25 , 35 , we still dont have income brackets assigned to those rates. Why not . Again, weve done a lot of work on this. I think the point were trying to make is we spent a lot of time on this. We cant have six people design the entire tax code. I think weve done a great job, the house and senate. We have everybody on the same page. Weve talked about brackets. But as opposed to releasing them, were going to work with the committees. The committees actually write the bills. Let me just comment on the 12 rate. When you raise the standard deduction, effectively the 10 rate disappears and people who were paying 10 are going to pay zero. Again, this is about creating middle income tax relief and simplification. Gary cohen was on cnbc this morning. He said the president is open to a fourth tax rate, maybe 39 , maybe just under the current 39. 5. Is that true . We did put in the release that weve designed the rates. We said that the committees will contemplate a fourth rate. To the extent wed do that, that would be if we need additional money for middle class reforms. Again, theres people who have different views on whether we should do that or whether we shouldnt. But the president is committed. This is not about a tax cut for the rich. I can tell you in the high tax states ive had the pleasure of living in new york and california. I can tell you my taxes are going up in any event, not down. And getting rid of deductions is worth over five Percentage Points on the high tax states. Can you say when this proposal reaches the president s desk, one of the musthaves is a distributional analysis. Although the estate tax will be eliminated, alternative minimum tax will be eliminated. The top 1 will not get a tax cut. Its been the president s objective from the beginning and this has now been dubbed the mnuchin rule. This is not about tax cuts for the wealthy. Were talking about income taxes. Its the president s objective that income tax wills nes will cut on the wealthy. Lets talk about the different states. You mentioned california and new york. They are one of several higher tax states. One of the acronyms that gets kicked around is salt, state and local taxes. This proposes to eliminate the federal Tax Deduction for what any income earner pays in state and local taxes. There are 52 Congressional Republicans representing districts that according to irs data those congressional districts paid higher than the average state and local tax, about 3800 a year. Peter king is one of them and he said he cant vote for any tax reform proposal that eliminates state and local taxes. If you lose any of those 52 House Republicans how do you pass this . Dont you love that politicians have our own languagecronyacronyms. I thats now referred to as state and local taxes. As i said, this doesnt help me. This hurts me. Okay. I think longer term getting the federal government out of subsidizing states is the right thing to do. Its just not fair. The federal government should not be in the business of subsidizing states. This is something that started in the house plan and that weve agreed with. Obviously for people in california and new york and new jersey and connecticut and other places, we understand the impact. Thats why as we look at the rates, again, even at the 35, theyre not getting a tax break. But this is something well work with congress on. Is it negotiable . What i would say is this is a pass fail exercise and we want to get tax reform done. The president s number one issue thats not negotiable is 20 Corporate Taxes and again we have a plan. This is a plan thats had a lot of support from congress and we look forward to working with the committees. To get tax reform, you need a reconciliation mechanism which means you have to pass a budget resolution in the house and senate. Some of the Freedom Caucus members would like 200 billion in entitlement cuts as part of that resolution. Can you live with that . Again, we do need a budget. I believe that if we get a tax plan that people want to support in congress, we will get a budget that goes along with that. One will lead to the other. One will lead to the other. They will go through together, but obviously theyre connected. Can i get you to be a little bit more specific on your or yen tie orientation to this idea because you need the Freedom Caucus votes . Ive had a lot of conversations with them. I respect them. This is a congressional issue and well work with them as budgets are developed in both the house and the senate. As a conceptual idea, are you in favor of getting rid of the debt ceiling as a matter of law and as a matter of practice on capitol hill . I think i asked the president about this two weeks ago and he was very open to the idea, in his own words. Exactly. I think as you know there are certain things that i came to a lot of experience with in this job, there are certain things i didnt. Ive heard a lot about the debt ceiling, but until you go through a debt ceiling, its a little different. I was operating the government like a piggy bank. We were operating the government with way too little cash. The first thing is i was very happy the debt ceiling got raised. The first thing i did that day was raise an extra 20 billion for same day settlement increase our cash. Thats how concerned i was. My view is that congress has every right they appropriate the money. They get to decide how we spend the money. But when we agree to spend the money, we need to agree to be able to pay for it. Whether we get rid of it or whether we approve a debt ceiling simultaneous with spending, i think in one form and another we need to figure out over time how to fix this system. At the end of the day republicans and democrats agree were not going to not pay our Government Debt and obligations. Default is inconceivable . Its absolutely inconceivable. This is a live issue. There are those in the administration ive talked to. Mulvaney said he wonders might any future president give up some of the leverage that comes with a debt ceiling vote. Others have said thats leverage you could find in lots of other different ways. Again, this is something that we want to figure out on a longer term basis. Obviously my number one issue was making sure the debt ceiling got raised. Im happy that it not only got raised until december 8th but my special powers got refilled, the treasury super powers, which takes us into next year. How far . Im comfortable we can fund the government through january. I dont have enough visibility beyond that. But i am comfortable that were not going to be in a situation on december 8th where we default on the government if we dont agree to this. Im hopeful that as part of the december 8th negotiations the president could have done a longer deal but wanted to make sure we had military funding and that is an important part of the december 8th negotiations. Im hopeful that the debt ceiling will be extended. Back to your appraisal of future projections on gdp growth, 2. 9 . If were pretty much there now, whats so exciting about tax reform if were going to end una 2. 9 or 3. 2 . Ive never said were going to end up at 2. 9 or 3 . What ive said is im very comfortable that we can get to higher than 3 sustained gdp growth. I think were using very very conservative numbers. I think theres a lot of expectations already in the economy since the president s been elected some of this has been baked into the cake. Its baked in. Were going to get tax reform, regulatory relief. Weve had numbers that look very very good, quicker than we even expected that people are reacting to the anticipation of all this economic changes. Let me throw the two rs at you. Retroactive to the first of this year, yes or no . I think wed like to. Revenue neutral . Again, i want to be very clear on revenue neutral. On a static basis it wont be revenue neutral. On a dynamic basis not only will it be revenue neutral, it will be revenue positive. Static means theres no change in activity. People dont change their behavior because they have a different tax code. No change in behavior. Lets take the corporate rate. Theres no question companies spend too much time trying to figure out how to keep money offshore. We think this is going to have a major impact of bringing back trillions of dollars. That money will be invested here, combined with what you said, expensing. Well create enormous capital investment. It is going to create enormous jobs and revenues. By lowering the tax rate, we can actually get a lot more in revenues. People spend a lot more time trying to figure out how to get around taxes at 35 than at 20 . Assuming changes in behavior, more Economic Growth, therefore a larger revenue stream. Correct. Bigger pie. There have been issues raced about your use of mil air. Secretary prices. The president said he was unhappy about the situation. As has he or the chief of staff kelly issued a directive about what is or is not permissible and what he wants secretaries to do when it comes to travel by air . I can only comment on the situation as it relates me. No, theres been no different directives as it relates to me. I look forward to were going to have an ig audit. Inspector general. Inspector general. Im comfortable that we followed all the proper procedures. Ive never had the government pay for any of my personal travel and the limited number of times weve used mil air, its been for either security, National Security issues when i had to have secure communications. I am on the National Security council and sanctions are a very very important part of the job. Or theres been times we couldnt get to places when we needed to be there. Again, its expensive and i understand why taxpayers are concerned about these issues. Again, im very comfortable and i look forward to the ig report reviewing our travel. As a general matter, what do you think is the future of Paper Currency . Just in general, how much do you think that will be a part of the way americans transact their business . Much of my own personal transactions are done electronical electronically. I carry very little cash with me. Whats the status, alexander hamilton, Harriet Tubman, Andrew Jackson . Let me comment first on currency. I do think the longterm trends are goi