(U.S. Secretary of the Treasury Jack Lew speaking with Bloomberg's Ian Katz. Photo by Carla Bales.)
During a stopover in Los Angeles on his way to the G-20 Meeting of Finance Ministers and Central Bank Governors in Cairns, Australia, United States Secretary of the Treasury Jack Lew visited with the UCLA Anderson’s Class of 2016 in a wide-ranging conversation that covered such issues as world economic growth, international sanctions against Russia, U.S. corporate tax inversions and stemming the flow of funds to ISIL (Islamic State of Iraq and the Levant). Ian Katz, who covers the Treasury for Bloomberg, moderated the conversation.
“There is a problem with growth and demand in many parts of the world,” said Lew, referencing some of the topics to be discussed at the upcoming G-20 meeting. “It was not that many years ago, that the U.S. economy not contributing to the solution, it was seen as the problem, due to the financial crisis. Now the question is, why has the U.S. bounced back and what do other countries need to do if they want to bounce back as well?
“Stimulating demand in the short term is part of the solution,” Lew said. “You can’t cut your way out of economic problems. The discussion has shifted from one of austerity to one of growth.”
Regarding corporate inversions (re-incorporating a company overseas in order to reduce the tax burden on income earned abroad, Lew said that the right answer is tax reform. “We need to clean up the tax code and take away the thing that’s driving companies to invert. I’ve said before, tax inversions are legal, but wrong. Congress, if they don’t enact tax reform, needs to enact legislation that shuts the door on inversions.”
Lew said he believes that the sanctions imposed on Russia in the aftermath of their actions in eastern Ukraine have been successful. “We worked closely with our international partners on around the world, the EU the G7 have been as carefully put into place as any sanctions against a regime ever. They put an enormous amount of pressure on Russia and the Russian economy … and we’ve done it in a way that was intentionally designed to cause as little spillover on Europe and the United States and the global economy as possible. Our goal is not to hurt the global economy. Our goal is not to hurt the Russian economy, the goal is to change the way Russian leaders are making their decisions.” Lew said that until Russian leadership changes its policies, that country will be more and more isolated.
After his discussion with Katz, Lew took questions from the first year students and was asked about, among other things, the role of the Treasury in the fight against ISIL. “For any military operation, flow of funds is critical. It’s how you support your activities. It’s how you pay your people,” Lew said. “It is very important that we work with our counterparts around the world to identify and shut down the flow of funds to ISIL. Lew said that cutting off funds to ISIL is complicated because it’s not clear how the group gets its money, but that work is being done to limit the flow of funds into ISIL.
Asked to describe what it’s like to work with his international counterparts – or the U.S. Congress – Lew said, “There’s no substitute for personal relationships. I think you’ll find that that’s true in the business world as well as it is in the public sector. I’ve invested a great deal of time getting to know the people I interact with internationally. If you don’t know each other, it’s very difficult to communicate effectively. And the distances are large, it means flying four days to spend two days in a meeting and not speaking much for a week but if you don’t put the time in, you can’t develop the relationships. And you have to listen. You can’t always be in broadcast mode,” Lew added.”