Column: Steve Mnuchin finally finds a respectful audience in Southern California


The last time Treasury Secretary Steven Mnuchin gave a speech in Southern California, he was treated so impolitely that he demanded that a video of the event not be released.

Eventually, UCLA, the sponsor of the Feb. 26 event, concluded that it was legally bound to release the video, and the spectacle of Mnuchin being hissed at by his listeners went public.

There wasn’t any such controversy at Mnuchin’s appearance Monday at the annual Milken Institute Global Conference in Beverly Hills, where financiers and investors are heavily represented.


Lots of economists when we came into office said the U.S. economy can’t grow at more than 2% rates given the size and aging of it. We didn’t agree with that.

— Treasury Secretary Steven Mnuchin

Mnuchin’s interlocutor onstage was Fox Business Network personality Maria Bartiromo. Decorum reigned, and Mnuchin was able to get out his views on the economy and Trump administration policies without interruption.

Chief among them: The economy is getting better, thanks to Trump. Noting that Trump had promised “sustained 3% or higher [gross domestic product] growth,” Mnuchin said, “Lots of economists when we came into office said the U.S. economy can’t grow at more than 2% rates given the size and aging of it. We didn’t agree wth that.”

What he didn’t say is that the Trump economy hasn’t come close to his goal on a sustained basis. In fact, over the last two quarters growth has fallen short of 3%--it was 2.9% in the fourth quarter of 2017 and 2.3% in the first quarter of this year.

Mnuchin pointed to the tax cut enacted in December as “a major component” of the push for economic growth, and largely declared victory. “We’re seeing a lot of money being invested in the U.S. and we’re seeing the impact of that in the economy.”

Yet signs of increased business investment are equivocal, at best. The Commerce Department in its first-quarter report cited an increase in fixed nonresidential business investment of 6.1% over the same period a year earlier. That’s a respectable figure, but it represents a slowdown from the rates reached in the first, second and fourth quarters of last year.


Moreover, as liberal economist Dean Baker observes, that figure represents orders placed as long as a year ago. “If we are looking for the impact of the tax cut on investment, we should be focused on orders,” he writes--and those are deteriorating, with nondefense durable goods orders, excluding aircraft, having fallen 0.1% in March.

Mnuchin also pointed to the “hundreds of companies” that have shoveled out one-time bonuses to employees, ostensibly as their share of the tax cut. And he sedulously defended the widespread practice by corporations of funneling their tax cuts into stock buybacks, a boon for shareholders.

Shareholders, he said, “recycle this capital through the economy; it doesn’t disappear….There’s nothing wrong with stock buybacks. That’s not a bad thing.”

This is an outstanding example of special pleading on behalf of the wealthy. The truth is that stock buybacks are disproportionately collected by a segment of the population that does less to recycle the money through the economy than, say, middle- and working-class families that would spend it promptly.

Mnuchin described the money devoted to buybacks as “excess capital,” but it’s excess only because corporations aren’t investing it in productive activities.

Bartiromo interspersed a few gentle curve balls amid the softballs she sent Mnuchin’s way. But when pressed, he retreated to familiar talking points.

Will federal deficits and overspending produce a recession in 2020? “I don’t buy that at all,” he said. Will the tax cut pay for itself (something fiscal experts almost universally doubt)? “If we do get the economic growth, by definition it will pay for itself.”

What about the slowdown in consumer spending cited in the most recent GDP report? “I think it’s one quarter,” Mnuchin said. “You can’t read too much into one quarter. I don’t expect to see a slowdown.”

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