3 urgent tasks awaiting Trump’s pick for Treasury secretary

(CNN) — Ensuring the US doesn’t default on its obligations. Extending trillions of dollars in tax cuts before they expire. Quarterbacking President-elect Donald Trump’s plans for the economy.

The incoming Treasury secretary, whomever Trump ultimately picks, will face a confluence of deadlines and campaign promises that will make the early days on the job even more challenging than usual.

By the time the Trump takes office, it’s likely that the US will have hit the debt ceiling, forcing the Treasury Department to use so-called extraordinary measures to allow it to continue paying the nation’s bills on time and in full. And congressional Republicans will be rushing to extend Trump’s landmark 2017 tax cuts act before a multitude of pricey provisions lapse at the end of next year.

All the while, the secretary-to-be will have to help execute Trump’s economic gameplan, which was voters’ top concern in the election.

“We have twin fiscal cliffs that start off next year. The debt limit begins the year, the tax cuts end the year,” said Ed Mills, Washington policy analyst at Raymond James. “The Treasury secretary is going to be at the center of those fights and is going to be monitoring the economic impact.”

Dealing with the debt ceiling

The Treasury Department will likely have to deal with the debt limit at the start of the new year. Congress suspended the cap as part of the 2023 debt ceiling agreement, but it will return effective January 2.

The Treasury secretary has to inform Congress that the US has hit the ceiling and outline the extraordinary measures it will take to avoid defaulting on the nation’s obligations. The current secretary, Janet Yellen, will likely make those initial moves since Trump will not take office until his inauguration on January 20. His Cabinet picks, including the Treasury secretary, traditionally have to be confirmed by the Senate.

But after the switch in administrations, it will be up to the incoming secretary to continue deploying those measures, monitoring the agency’s continued ability to pay the bills and keeping lawmakers and other stakeholders informed.

“This will be a unique occurrence in the modern history of the debt limit where we have a transition from one administration to another in the middle of a debt limit episode,” said Shai Akabas, executive director of the Bipartisan Policy Center’s Economic Policy Program, noting that in Trump’s first term, then-Treasury Secretary Steven Mnuchin was confirmed the month before a debt limit suspension expired.

Though the debt ceiling is set to return in January, the nation is not expected to be in danger of defaulting on its obligations until later in the year – giving the incoming Treasury secretary some time to ramp up. But conveying the status of the department’s ability to pay the bills to lawmakers, holders of US debt and others is critical.

“Because of the weight of the issue, it’s important to have someone delivering that message who is a respected figure of authority,” Akabas said.

Extending the Trump tax cuts

Addressing the expiring provisions of the 2017 Tax Cuts and Jobs Act will be among the top priorities of both congressional Republicans and Trump, who promised frequently on the campaign trail that he would extend – and even expand on – the package from his first term.

The incoming Treasury secretary will likely be a key voice in developing the plan, which will not be that easy since extending the provisions is expected to cost roughly $4.6 trillion. To pass the package, Republicans will need to use reconciliation, a procedure that would allow the party to approve legislation in the Senate with fewer than the standard 60 votes.

The law’s sweeping array of temporary tax cuts lowered many of the individual income tax rates, including the top rate from 39.6% to 37% for the highest earners; nearly doubled the standard deduction so only about 10% of filers now itemize their deductions; and capped the state and local tax deduction at $10,000 per filer.

Also, the TCJA doubled the annual child tax credit to $2,000 and allowed more higher-income parents to claim it; essentially doubled the estate and gift tax exemption so even fewer wealthy people are subject to it; and created a special deduction for the owners of certain pass-through entities who pay their business taxes on their individual tax returns.

“The Treasury secretary has historically played a significant role in advancing the administration’s tax policy priorities,” Akabas said. “So I would expect that the next Treasury secretary will be engaged as the Republicans try to move reconciliation legislation, both in terms of engagement with Capitol Hill and in terms of relations with media and other external stakeholders.”

Managing the Trump economy

Deep frustration with the state of the US economy helped deliver the White House to Trump, who has promised to get the cost of living under control. Voters who gave the economy low marks swung heavily in Trump’s direction, according to CNN exit polls.

Next year, Trump’s Treasury secretary will act as the quarterback, executing his economic gameplan.

That means selling the public, lawmakers, investors and CEOs on Trump’s plans to shake things up by imposing steep tariffs, waging mass deportations and delivering tax cuts – in a way that doesn’t cause the inflation that mainstream economists have warned of.

“The Treasury secretary is basically the economy czar,” said Mills.

It will also fall to Trump’s Treasury secretary to put out fires in financial markets or in the real economy like the regional bank failures that rocked Wall Street and Washington early last year.

“Whenever there is turmoil in the market, the first place you look is Treasury,” said Isaac Boltansky, director of policy research at BTIG.

In addition, Treasury serves as Washington’s banker, managing the day-to-day cash needs of the federal government. It falls upon Treasury officials to plan out how much money to borrow by issuing short-and long-term debt. Treasury must make sure those borrowing plans don’t rattle the bond market, spiking interest rates.

It’s an especially critical task these days given concerns about high federal budget deficits that economists, investors and analysts fear could get even bigger during the next Trump administration. The Trump agenda could spike the national debt by nearly $8 trillion, according to projections by the Committee for a Responsible Federal Budget.

Trump’s Treasury pick will also help manage the complicated relationship between the president and Federal Reserve Chairman Jerome Powell.

“The concern in the market is how aggressive Trump is going to be bashing Powell publicly and what that means for the Fed’s independence,” said Mills.

Mills credited Mnuchin with effectively back-channeling communications and easing tensions between the Fed and the first Trump White House.

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