The Economic Club of washington about the republican tax plan earlier today. Can i have your attention, please . Okay. So everybody please sit down. Thank you. Can everybody please sit down . Thank you. As you know, i normally open with some announcements and all those who came to hear those announcements, youll have to wait a little bit. Because gary is on a tight schedule, so were going to start the interview right now and go for about 50 minutes and then gary will have to leave, go back for an announcement at the white house and i will then make my announcements about everything and then the main course will be served then. Okay . So gary, let me first introduce you. Gary is the assistant to the president for Economic Policy and head of the National Economic council. He had the position from the beginning of this administration. He is by background a native of Shaker Heights in the cleveland area. He went to American University in the city. Graduate of the school of business there. And then subsequently went to work briefly at us steel and then the mercanile and then Goldman Sacks and rose up to be the head of the Commodities Division and currently the com mod dees fixed income division, then the co head of the Equities Division and co head of the Global Securities division and then ultimately in 2006 became the president and chief operating officer and director. He is under tight schedule, so im going to start right now. Thank you for doing this. I was just wondering how much of my boi yio you memorized. I memorized a little bit. You did pretty good. So are the gegos bigger in washington or wall street . What egos . None whatsoever. Have you found since you became the point man or one of the two point man on the tax bill that youve become very popular . All of a sudden people call you and tell how serious their issue is for whatever other reason . No less or no more people call me today than called me for a long time. Maybe its just a personality flaw, but it seems like no one no more, no less. So people arent calling you more than they did a year ago . Not really. Sf you dont have High School Friends calling you a few of that . Not really. Its been interesting. People sort of let me alone, let me do my job and im sure once they start seeing what we do and how it impacts them, that may change. I think people reserve the right to call me but so far they havent exercised that option. Today the house leadership unveiled their bill. Youre going to have a meeting at the white house with the president and leadership i guess at 1 30 n. Talking about it, is the bill that was released or the proposal released today, is is that something the president can support . If that bill went through as srk t is, the president would sign it . The six of us came out with the framework and we got that after starting in diverse different places, the six of us. We got ourselves to a unified framework which really had two driving principles in it. Driving principle number one is we had to deliver a middle income tax cut. Number two is we had to lower the business tax rate to make us competitive with the rest of the world. The bill that the house delivered today accomplishes both of those objectives. In fact, they stuck very much to the framework that we had delivered. So yes, the bill that the house has delivered, the ways and Means Committee delivered today, is a bill that the president can support. Do you have any reason to think the Senate Finance committee will agree to the same bill . I think the senate, like the house, is going down their path during regular order. One of the other components that we agreed to as the group of six is we were going to do tax reform in what we call regular order. We would go through normal committee processes, the tax righting committee in the house and senate, they would write their own bills. They would go through their committee process, they would go to floor. If we need to we would go to conference at the end. Thats exactly whats going on here and thats how were going to get the buy in in the process. The senate is doing that. They are cooperating with the house and the house did cooperate with the senate. We are going to get bills that have a lot in common. Im not sure theyll be in 100 in common, but i think well be in a good enough position to deliver a tax bill to the president s desk this year. This year . This year. Youre very confident that the house will pass it and the saen senate will pass it and the conference will pass it this year. We are working towards this year. Did the leadership tell you they have the votes to pass in the house now . The bill just got dropped this morning. We know the house has been spending an enormous amount of time with their Committee Members as well as the rest of the members working on the details. Im confident and the speaker was in the oval office two days ago talking about the bill with the president. We were there together. Im confident the speaker is going to be able to deliver a bill out of the house. When you do these bills, you have a ten year cost, reduction cost that raises or costs a certain amount of money. That number is prepared by the joint Tax Committee more or less. Do you accept these numbers . How can anybody really know what somebodys going to cost or bring in in ten years . People accept this as gos tell becau gospel because you have no choice . We have to accept the score to get the legislation through. We will argue that the results and the history will tell us that the results will not be what the score says it will be. But we will legislate to a bill that gets the score that we need to get to get it through the legislative process and we happen to very strongly believe that we are going to way, way surpass what theyre going to score on the revenue side of the equation. Does the treasury have its own revenue estimates or theyre not relevant in terms of these things . Treasury is very relevant. Yes, they have a large group of people in the treasury that spen an enormous amount of time on tax and scoring tax and working on. That they have their own revenue estimates and we have our own revenue estimates everyone else will have their own revenue estimates of what it will do to the economy. In the end when theyre marking the bill up, its only the joint Tax Committee numbers that really matter i assume. In terms of the bill itself, its a bill that is designed to have 1. 5 trillion of incremental debt at the end of the ten years. Wed like to say less revenue. Okay. Thats how the instructions are. The instructions are less revenue. Originally, it was supposed to be a revenue neutral bill. Why did the administration and the house go for a 1. 5 trillion deficit increase in debt . The reconciliation instructions give us room to produce a piece of legislation that had 1. 5 trillion of less revenue on the scoring system that youre talking about. We do not believe that is going to be the actual reality. We believe that by lowering the business tax in the United States and becoming much more competitive with the rest of the world and dropping our rates down where we encourage businesses to come back to the United States and redomicile back to the United States that we are going to grow our economy at a faster rate than the model is going to suggest. We also believe that by lowering the tax rate on middle american hard working families, they are going to spend more money, the economy is going to grow. So we do believe that theres going to be more growth in gdp, more revenue to be taxed and the revenue theyre saying wont show up we believe will show up and well be able to tax it even though we tax it at a lower rate. Its going to take the Corporate Tax rate from 35 to 25 . Some say why not phase it in over five years. It would cost less. Do you think theres an advantage to being it immediately . We do think. You and i have sat in a lot of Corporate Board rooms. Boards like to know whats going to happen and they like certainty. Yes, it would be nice to say that its certain, but theres nothing more certain than having it happen. We know by having it happen next year and then on top of that giving people a five year expensing window where they can do 100 expensing, we are sending a very clear message that we want you to invest in this country, we want you to move jobs back, we want you to hire people, and were not making it ambiguous. Were making it clear what we want you to do and how were going to grow the economy. And the phase in, we dont want people to think about investing in this economy. We want you to do it now. The under an excise tax theres no incentive to keep the tax offshore so that money will all come back presumably. Is there any incentive that the companies who bring it back have to create jobs . What are they likely to do with the cash . Youre right. The repatriation fee is a deemed fee. Were going to clek tollect the on you over the window whether you bring the money back or not. Were going to create an environment where we hope that you invested back in your business. But ultimately youre either going to invest it back in your business or distribute it out of your business to someone else whos going to invest it back in another business. Lets talk about some of the controversial provisions. Controversy is in the eye of the beholder. Lets talk about state and local income tax deduction. You must be very familiar with that ive heard about it. In states that you are a resident of new york. New york, massachusetts, other high taxing states, high state and local income tax, they will no longer residents of those states will no longer be able to deduct that income tax. Is that correct . Its sort of correct. There are a couple little provisions in there that we did add back some Real Estate Tax property tax if you do choose to be an itemizer. But as a whole we have eliminated the vast majority of those deductions. Wont you believe that will be very difficult for high state tax representatives or senators to agree to that provision. At the end of the day this comes down to are we delivering a middle income working tax cut or isnt we believe that the house plan is delivering that. And when you score it out and when you see the distributions and the distribution tables will be out relatively shortly, the distribution tables will determine whether were delivering that tax cut or not. We believe that this plan that the house laid out is able to adequately deliver that distribution to those working families where we told you we were going to deliver that tax cut. The average family of four in the materials that came out today is a medium family of four is 59,000 and they will get a tax cut of about 1,140 roughly. I wont argue for 40. So the medium family of four will get it. What about the people who are in the upper income . Will they be getting a tax increase or tax cut or neutral . Look, it depends on each and everyone individuals circumstances. The hard part about taxes is everyone has their own unique set of circumstances. We set out with the objective. We had two objectives. Middle income tax relief and Corporate Tax relief. We have not targeted the upper income brackets, but we do believe that there is quite a bit in for the upper income families. Were dealing with estate tax and other things that saffect upper income taxpayers. When you look at the package in the entirety, were able to touch everyone in some positive way. The estate tax, youre going to phase that out, so i think the estate tax goes away in four or five years under the proposal. Why not just get away with it right now immediately . Just cost to to much to do that . Its about scoring. I think the house plan is 24, but theyre going to double the exemption day one, so next year theyll double the exemption up to 11 million a person, 22 million for a married couple. And then in 24 theyll give you a full exemption. I dont know 100 what theyre going to do on the gift tax but there will be gift tax restrictions. If you want to give money to your children, youre better off to wait four years to die, then you get it tax free. Youll have to debate that with your children. Okay. I think my children prefer i stay alive. Okay. Well, i have no doubt thats the case. Im not sure where my kids. But okay. So lets talk about universities. New provision that many people didnt anticipate is now in there which says that if youre a university and you have a private university, not a public university, you have an endowment. There will be a 2 tax on that endowment include. Why not include public universities have big endowments as well. The house is making their decisions on how they want to raise revenue, how they want to balance the bill, how they want to make it work. And its over 1 billion threshold. Its not on the first dollar of endowment that you have. I also think there are some laws in the system about taxing private under these versus public entities. Youre getting into a layer of tax legality that i will admit is above my understanding of the tax code. I doubt theres anything that at this point you worked on very complex corporate transactions. Have you ever worked on anything as complex as the tax rode . Probably not. Probably not. Its got as many moving parts and more constituents than any transaction ive ever done. This bill is designed to pass the congress, but its designed to pass with no democratic votes. If it passes with no democratic votes, with the Administration Live with that . Yes. We prefer it to be bipartisan and we have spent an enormous amount of time trying to make it bipartisan. I think youve seen that the president has traveled with democratic members of the senate to their states to talk about the bill. The president has had dinners with Democratic Senate members. Weve had bipartisan meetings on both the house and the senate, in the white house. I and secretary mnuchin spent a lot of time with different democratic groups trying to get bipartisan support for what were doing. We would love to have a bipartisan 60 vote bill. But if its a republican only vote, the president will still sign it . Hes not going to not sign it because if it delivers middle class tax relief and a 20 Corporate Tax rate and it shows up on his desk, i can guarantee hes going to sign it. Does the president expect to be involved in lobbying members for votes or is he going to say now its the house problem, the senate problem, ill stay a above the fray, or will he get involved in lobbying . The president cares a lot about tax reform. This is one of his main pillars he ran on. Its all about cleaning up washington. Its all about making the system fair. Its all about returning hard earned income back to middle class families. The president is going to do what he needs to do to make sure we deliver on his campaign promise. Lets talk about a few other things before we get back to taxes. Lets talk about trade, another easy issue. Nafta. Do you expect that there will be a renegotiation that will be agreed to or do you think its more likely that well pull out of nafta . We are trying to renegotiate nafta to be fair, to be good for american workers, to be good for american jobs and to make sure that our american based companies are treated fairly in a free trade system. All right. So you think you will work out a deal . Were trying. The negotiators are continuously meeting and were continuously trying to get to a point where we think that americanbased companies and manufacturers are treated fairly in the agreement. In terms of trade, the president will be going to china shortly. He has from time to time been unset with the trade deficit we have with china. Do you have any plans to do anything about that or mention that to xi jinping when hes the there . I probably assume it would get mentioned. What about south korea . Hes been upset about hes going there. So hes going to vietnam, south korea, japan and china. Am i radio it . Hes going to tokyo. And then yeah. And then philippines. So when he goes to south korea, he will mention the trade imbalance . Uhhuh. Okay. Let me ask you about look, hes also got many other issues on his agenda. Obviously north korea is a big issue. Hes going to spend a lot of time talking about north korea. When the president has gone overseas before, you have gone with him. Now your responsibility is to get this tax bill. Youre not going to go on this trip . I had a long discussion with the president and i thought it was a better use of my time. Not that the trip isnt un believably important, but the two of us staying here and working with congress to make sure that tax reform stays on its agenda while hes gone. Hes gone over 12 days that we should stay here and work on that. When theyre having markups, they wont be in sessions. Theyll be calling you because your input will be valuable. You expect to be involved in all the back and forth . We have great relationships with leadership of both the house and the senate, with the committee chairs, with the committee leaders. Were in relatively constant dialogue with them on where theyre headed, what their ideas are, what their concepts are, making sure were all working together. On health care legislation, do you expect that will be revived as a possible thing to do after tax care tax cut is done . I mean, right now were planning on looking at health care in the new year. There was a rumor that maybe the president or somebody wanted to have the elimination of the mandate in the tax bill. Is that off the table now . Well, the president tweeted about it yesterday. So its not off the table. Its something that could be looked at. We are spending a little bit of time looking at that. If it works and we have votes, the president would be inclined to have us look at it and look at it quite aggressively if we can get that done as well. The president wants to do a twe tweet, does he call you and say im going to do a tweet . Does he consult with you before they go out . Sometimes yes, sometimes no. Depends on the topic. Okay. So in terms of your background, you have been very public about the fact that you were not a great student booze you were dyslexic. How did your family get you treatment for that . I try to explain this and this audience might be the eight age to understand this. In the 1960s when i was growing up as a dyslexic kid i dont know if dis lexia was sort of a commonplace name for a disease. So when i was growing up, you kn