The following is a transcript of an interview with Gary Cohn, the former director of the National Economic Council, that aired Sunday, January 19, 2020, on "Face the Nation."
FACE THE NATION MODERATOR MARGARET BRENNAN: We're back with Gary Cohn. He is the former director of the National Economic Council under President Trump. He's back in the private sector these days. Thank you for being here.
FORMER NATIONAL ECONOMIC COUNCIL DIRECTOR GARY COHN: Thank you for having me.
MARGARET BRENNAN: So the economy is going to be front and center in this election. Many economists say we're overdue for a recession. Do you think we're on the brink of one?
COHN: Margaret, first of all, it's great to be here. I know a lot of people have been talking about a recession. I do not see a recession on the horizon here. The U.S. economy is strong and continues to be very strong. The U.S. consumer is very strong. If you look at what's happened in the last couple of years with tax reform, we have put more disposable income in the hands of the U.S. consumer, and the U.S. consumer is out spending it.
MARGARET BRENNAN: So then why is the president and his-- the man currently in the job you once held, Larry Kudlow, continuing to criticize the Fed chairman?
COHN: I'm not worried about interest rates right now. I think our interest rate policy is in a good place, I think the consumer is in a good place, and I think the U.S. economy is in a good place. We actually have interest rates at a level right now where activity is growing. I think that, you know, fourth quarter GDP will come in around two, 2.5 percent--
MARGARET BRENNAN: So you--
COHN: --probably 2.5 percent.
MARGARET BRENNAN: --you differ from the president on that quibble about interest rates currently?
COHN: I don't think I differ from the president on the economy being strong.
MARGARET BRENNAN: Right.
COHN: I think we agree completely about the economy being strong.
MARGARET BRENNAN: But on interest rates--
COHN: Yeah, I agree that I- I think the Fed is in a good place on interest rate policy.
MARGARET BRENNAN: I want to ask you about trade. This week, the United States and China, the two largest economies in the world, signed this phase one trade deal. There's like 200 billion in promised purchases, but there are still like 300 billion dollars' worth of goods under tariff. So what does this actually accomplish? What- what do you see it?
COHN: So, first of all, anytime the United States and China get together and sign an agreement, I think we should applaud that. I mean, the mere fact that we got a 90-plus page agreement signed between- between the two countries is very good relative to where we were months ago when everyone thought we were going to continue to feud with China. So we've got some trade agreement in place. The Chinese are going to buy some more goods from the United States, which has to be a good thing. But there's also, in that agreement, there are some provisions that free up trademarks and trade patents and trade secrets, which is very, very good. No, this didn't--
MARGARET BRENNAN: I thought this was about intellectual property--
COHN: This didn't- I said--
MARGARET BRENNAN: --and theft and all of those things?
COHN: This didn't address, look, this--
MARGARET BRENNAN: Yeah.
COHN: --did not address the big issue. The big issue the president and I agreed upon is that the Chinese had been stealing our intellectual property. They've been infringing on our- our trademarks. They've been infringing on our copyrights. It has not addressed that. And we still have to continue to address that.
MARGARET BRENNAN: Do you think that China is going to hold up its end of the deal and actually enact some of the reforms they say they're going to carry out?
COHN: I- I think they're going to. I think they're going to open up their markets. I think the Chinese have been close to opening up their markets for the- for the industries that were listed in there. So I'm cautiously optimistic that the Chinese are going to start reforming and opening up their markets.
MARGARET BRENNAN: So you resigned over a difference about tariffs, or at least that was a--
COHN: Yeah, I don't think that's actua- accurate but go ahead.
MARGARET BRENNAN: Well, then why did you resign?
COHN: Well, look, I- I- I left the administration for a variety of different reasons. And- and the president and I had very open conversations about my policy views and his policy views. We'd accomplished a lot. And at the end of the day, he was going a different direction on some of the trade negotiations than I would have gone. I agreed fundamentally on what the issue was. I just didn't agree on how to solve the issue.
MARGARET BRENNAN: So the steel and aluminum tariffs was what many thought was the impetus for your resignation?
COHN: Well, I didn't think--
MARGARET BRENNAN: You're saying it's not?
COHN: I didn't think the steel and aluminum tariffs were helpful to our economy.
MARGARET BRENNAN: But when it comes to the tariffs that were used to get to the- the negotiating table with China on this deal, or where ultimately they ended up with the free trade deal- the new NAFTA, so to speak, USMCA. Can the president say, look, people may not like my tactics, but I got this done? Was he ultimately right? Were you wrong?
COHN: They- they can say that. I don't think we would have gotten to a different outcome. I don't think the tariffs helped us get to any different outcome.
MARGARET BRENNAN: Did it hurt the U.S.?
COHN: I think it has hurt the U.S.. I think it's totally hurt the United States. Look, the U.S. economy is very strong, very solid. Employment growth is great. But we're missing a big component. We're missing the capital expenditures from companies in the United States. That was a key component to tax reform. It was a key component to what we thought would help drive the economy in 2018, 2019, 2020 and on. We put some very stimulative measures into the tax reform--
MARGARET BRENNAN: Lowering the corporate tax rate is what you thought was going to get companies--
MARGARET BRENNAN: --to spend more?
COHN: --not lowering. We actually gave them expensing of CapEx. For the first five years, they can 100 percent expense their CapEx. But the minute you turn around and put steel and aluminum tariffs on them, the minute a company is thinking about spending capital, what do you go out and buy? You go out and buy steel and aluminum. That's how you build factories. That's how you build property-- plant equipment. So all of the sudden, the advantages that we were trying to give companies to help stimulate the economy, to build facilities, to go out and hire people, to drive wages, we took away that advantage by taxing the input that they needed to build.
MARGARET BRENNAN: You're saying the president got in his own way?
COHN: I'm saying the policies collided with each other.
MARGARET BRENNAN: Gary Cohn, stay with us. And we will be right back in a moment.
MARGARET BRENNAN: Welcome back to FACE THE NATION. We continue our conversation with former director of the National Economic Council, Gary Cohn.
So at this signing ceremony the president did this week with China, he said:
PRESIDENT DONALD TRUMP: I made a lot of bankers look very good.
MARGARET BRENNAN: The top six U.S. banks saved about 32 billion dollars because of the tax cuts that you helped craft. This is analysis, according to- to Bloomberg News. The- the hit on the tax law is that it is good for corporations, it's good for business. It's not good for the little guy. Why do you think this analysis is wrong? The president seems to be saying and applauding that he's helping out big banks.
COHN: Well, our- our tax bill's clearly working, which is great. We've made U.S. businesses competitive again with the rest of the world. We lowered the corporate tax rate to 21 percent. So we now have a corporate tax rate that is competitive with the rest of the world. Yes, we lowered corporate tax rates, and that in itself cost less than a hundred billion dollars a year to do that. But it stimulates huge economic growth. The businesses in the United States now can thrive, which means that they can grow. They can go out and hire people, which we've seen. We've seen record unemployment. We've seen record unemployment rates down to 3.5 percent. We've seen wage growth. We've seen 3 percent plus wage growth. And most importantly--
MARGARET BRENNAN: You put this all on the tax law?
COHN: We've seen- a lot of it has to do with tax law. It has to. We've seen higher-end wage growth at the bottom pay scale than we have at the top. So we're seeing the incentives that we created in the tax law by lowering the corporate rate, we're seeing that happen, and that is happening in the last couple of years.
MARGARET BRENNAN: There's a whole debate about the contribution to the deficit. But I want to put that aside here because I want to focus in on something--
COHN: Oh, please don't.
MARGARET BRENNAN: I want to focus in on something, though, that- that is really resonating politically. And it is this broader argument that this country somehow is rigged to benefit the wealthy and disadvantage the poor. And you've even had Jamie Dimon, the CEO of JP Morgan, you've had Hank Paulson, former Treasury secretary, former head of Goldman Sachs. I know you know him. They've said that they're all concerned about income inequality growing in this country. Are you concerned?
COHN: Of course I'm concerned.
MARGARET BRENNAN: But you- but you don't-
COHN: We're all concerned-
MARGARET BRENNAN: --think in any way that there have been contributions to that through the tax law you helped write?
COHN: I- I think there's been contributions for the positive. I think if you look at the data, you'll see that we have grown wages at the bottom end of the pay cycle- scale, I'm sorry, pay scale faster than we've grown them at the top. That's exactly what we're trying to do. We're trying to attract more jobs back to the United States, put more people to work. And that's what we're seeing happening.
MARGARET BRENNAN: Michael Bloomberg says about this tax law, nearly all the money goes to people like me who don't need it. This is a guy who knows Wall Street, who is a billionaire. He's saying that the tax law is- is only advantaging people like him.
COHN: I'd love to know how it's advantaging him. I'd love to see that because at the end of the day, we have lowered rates. I'll agree that we've lowered rates. We have broadened the base, meaning that we make more of your income taxable. That's basic tax policy. Lower rates, broaden base, meaning you get rid of more of the loopholes that people have used to deduct from their income what they pay taxes on. We got rid of a lot of the loopholes. So people are having to pay more taxes- they're having to pay tax on more of their income. Yes, they're paying it at a little lower rate.
MARGARET BRENNAN: Are you going to endorse Michael Bloomberg, whose board I believe you sit on--
COHN: I do not, I do not--
MARGARET BRENNAN: --as part of one of his Bloomberg entities?
COHN: I sit on one of his-- his emerging market boards. I guess it's a board.
MARGARET BRENNAN: But that doesn't mean you're necessarily going to be voting for him?
COHN: It does not.
MARGARET BRENNAN: Two of the candidates who are also vying for the Democratic nomination -- Bernie Sanders, Elizabeth Warren -- constantly come back to this idea of income inequality. They have proposed taxes on billionaires, taxes on financial transactions- Elizabeth Warren has specifically referred to that. People making over 50 million dollars having an additional 2 percent tax. What would the impact of those policies be from your perspective?
COHN: Look, our tax system in the United States is very, very progressive. We have-- over 50 percent of the population today of workers do not pay a dollar of federal income tax. So if you're going to collect more revenue, which I'm not against, we have to collect more revenue, it's going to come from the top half of workers. And in fact, it's going to come from the top 10 percent of workers. That's where-- that's where you can find the taxable income. I think that we will end up doing that. We will potentially need to do that. But these fangled plans that they're coming up with, we don't need to do things like that to collect more income from people. We have a basic tax system that works, and we can do some basic fundamental things, if we need to collect more money. The question is do we need to collect more money? You know, we look at spending and we look at revenue and we don't talk about them in the same sentence. We we collect taxes and then we spend. And Congress never thinks about how much money they have to spend. They just go spend. And so you wouldn't run your household like that. I wouldn't run my household like that. I would decide how much revenue I have and then how much I could spend.
MARGARET BRENNAN: But you're- you're a Democrat.
COHN: Yes, I am.
MARGARET BRENNAN: Is there a single Democrat that you would consider voting for?
COHN: There- there- I- I'll consider voting for anyone. I vote on policy.
MARGARET BRENNAN: Even Elizabeth Warren, whose policy you just tried to--
GARY COHN: I would consider voting for anyone, I said. I didn't say I would. I said I'd consider voting for them.
MARGARET BRENNAN: Well, that's evasive.
MARGARET BRENNAN: In pulling apart some of her proposals, you seem to be reflecting a lot of what Wall Street says, which is that there is deep concern over this focus on the financial community, on corporations, etc.. In this environment, is this enough that you see some of the people you know on Wall Street continuing to vote along lines of whatever the president is putting forward, even if they don't like some of his behavior, vote for him because of what he's doing for--
COHN: That's a --
MARGARET BRENNAN: --banks?
COHN: --that's a hypothetical question. I don't know. What I do know--
MARGARET BRENNAN: You don't know who you're voting for?
COHN: --what I do know is the economy is really strong, and the Democrats haven't really come up with an idea of how to help the economy get even stronger. So it's probably easier to talk about corporate greed, and talk about Wall Street, and talk about technology companies because they don't really have an answer for an economy that's growing 2.5 percent with 3.5 percent unemployment and 3 percent wage growth. I haven't heard their answer on that, except let's tax it to death.
MARGARET BRENNAN: So as you said, you identify as a Democrat. You did have disagreements with the president on a number of things. I was there in Trump Tower the day of the Charlottesville reference – "fine people on both sides" -- I remember your face that day and you were very public about some of your differences with the president. Will you vote for him?
COHN: Look, I'm very supportive of the president's economic policy. I'm very supportive of what he's done on deregulation. I haven't heard anyone who's come up with a better policy yet. Now, I just don't vote on the economy. I vote on a lot of the social issues as well. So, you know, in many respects, I've got to balance both sides of that equation before I figure out who I'm gonna vote for.
MARGARET BRENNAN: So you're leaving the door open?
COHN: I'm leaving the door open. But at this point, I don't have any intention not to vote for the president.
MARGARET BRENNAN: You are a frank guy. You're usually pretty direct.
MARGARET BRENNAN: Is there anyone around the president who can be direct with him right now? Is there anyone doing what you said you did when guiding him on some of these economic policies?
COHN: I don't know. I've been gone a year and a half. I am sure there are people when talking to the president--
MARGARET BRENNAN: But when the president can say, "Look, I've gotten these tariffs that have helped me get this free trade deal with North America. These tariffs have helped me get this Phase 1 deal with China" -- doesn't that encourage the president's approach, one that you have said you have differed with him on?
COHN: It may encourage his approach- but he- he's also got advisors in there that I'm sure are telling him differences. I know that there are people in there- you know, Secretary Mnuchin and I had a lot of conversations where we agreed on tariffs- and I'm sure the secretary is talking to the president about tariffs and what effect they're having and what effect they're not having.
MARGARET BRENNAN: Lastly, I want to ask you about a new book. I know you haven't read it. It's coming out, and there've been excerpts released that directly reference you, which is why I want to give you a chance to respond. He's called the president is- is- in this meeting accused of calling advisers "dopes and babies" and the like. Is the- the description of the president and his management style matching your experience?
COHN: I don't know what book you're referring to. As you said I haven't read it, so I- I- I wouldn't know.
MARGARET BRENNAN: The management style of berating advisors?
COHN: Look, the president is-- what you see on TV is exactly what you get in private with the president. The president is the same person behind closed doors as he is out in public, which is- which is a unique feature. You know, it's not like he turns it on or turns it off when he walks outside. So you've seen everything the president has. That's exactly what you see when you're in a private meeting with him.
MARGARET BRENNAN: All right. Gary Cohn, thank you for your time.
COHN: Thank you.
MARGARET BRENNAN: We'll be right back with our political panel. Stay with us.
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