US treasury secretary promises August tax reform

Steven Mnuchin said Trump administration would also review lending regulations

Treasury secretary Steven Mnuchin waits for a meeting with US president Donald Trump this week. Photograph: AFP

Treasury secretary Steven Mnuchin waits for a meeting with US president Donald Trump this week. Photograph: AFP

 

The new US treasury secretary, Steven Mnuchin, has committed the Trump administration to passing a “very significant” tax reform plan by August and promised an economic growth rate of at least 3 per cent.

The former Goldman Sachs banker and film financier, who was confirmed by the Senate last week, said on Thursday morning that he expected the administration’s plans for a tax overhaul, coupled with a curb on regulations, to boost the US economic growth pace to 3 per cent “or more” – potentially as early as next year.

The prospect of tax reform, which is likely to see the US corporation tax rate reduced, is a worry in the context of Irish foreign direct investment.

“We have underperformed where we need to be,” Mr Mnuchin said in an interview with the CNBC network, referring to the US economic trajectory under the administration of Barack Obama.

The world’s biggest developed economy grew by 1.6 per cent in 2016, and economists surveyed by Bloomberg are only expecting a pick-up to 2.3 per cent this year and in 2018. Beyond tax reform, Mr Mnuchin said the administration was also committed to reviewing regulations on banks to ensure they were able to lend to individuals and small businesses.

The remarks echoed rhetoric from US president Donald Trump who has said that the Dodd-Frank legislation (which allowed government regulate the financial industry) has strangled the financial industry and hampered economic growth.

“There’s an incredible amount of liquidity out there and we want to make sure banks put it to work,” Mr Mnuchin said.

Longer maturities

Mr Mnuchin also raised the prospect of government bonds with maturities of 50-100 years. He said that US Treasury would consider the idea of selling debt at longer maturities than 30 years, calling the concept a “serious issue”.

Staff at the Treasury would explore the idea of launching 50-100 year bonds, he said, but it had not yet made a formal decision on the matter.

Ultra-long bonds have already become popular in Europe amid a period of historically low bond yields.

The $14 trillion (€13.2 trillion) US treasuries market is the biggest and the most actively-traded in the world. The country has extended the average maturity of US bonds to five years and nine months by the end of 2016, from four years and seven months ahead of the financial crisis, according to Bloomberg data.

(Copyright The Financial Times Limited 2017)