by Bob Woodward
“I can’t believe you’d let some fucking guy like this into the Oval Office,” Kelly told Trump. If this was the way it was going to work, he said, “then I quit!” And he stormed out.
Trump later told others that he thought Kelly and Crane were going to get into a fistfight.
Kelly urged the president to select Kirstjen Nielsen, a 45-year-old lawyer who had been Kelly’s Department of Homeland Security deputy, as the new secretary.
“Kirstjen is the only person who can do this,” Kelly argued to the president. “She knows DHS, she was my chief of staff, she’s terrific at all this stuff.”
The nomination was sent to the Senate on October 11.
The president saw that Fox News commentator Ann Coulter called Nielsen “an open borders zealot” who opposed Trump’s border wall. Lou Dobbs piled on, saying Nielsen was pro-amnesty, not a true believer, not an immigration hard-liner, and served in the George W. Bush administration. At her confirmation hearing she had said, “There is no need for a wall from sea to shining sea,” and Dobbs, a strong Trump supporter, called this comment “outrageous.”
“Everybody’s saying that she’s terrible,” Trump said later to Kelly in the Oval Office. “It’s a joke. She’s a Bushie. Everybody hates her. How could you have possibly made me do this?”
“She’s the best,” Kelly said. “She’s the best of the best. I can personally vouch for her. She’s the first woman to lead the department. I know she’s a good person. She’s going to do a great job. She will be very effective. She is on your team. She was my right-hand person when I was there. She knows the department.”
“That’s all bullshit,” Trump said. “She’s terrible. You’re the only one that thinks she’s any good. Maybe we’ll have to withdraw her nomination.”
Kelly threw up his hands. “Maybe I’m just going to have to resign.” And he stormed out.
Porter later took Nielsen’s commission for Trump to sign that would officially make her secretary.
“I don’t know if I really want to sign this right now,” Trump said. “I’m just not sure about her.”
“She’s been confirmed,” Porter said. The Senate had approved her nomination 62 to 37. “You’re going to attend her swearing-in.”
Trump signed.
* * *
Kelly appeared on Fox News’s Bret Baier show and said that Trump had gone through “an evolutionary process” and “changed his attitude toward the DACA issue and even the wall.”
At the White House, Trump went through the roof.
“Did you see what Kelly said?” he asked Porter. “I evolved? I’ve changed on this? Who the fuck does he think he is? I haven’t changed one bit. I’m exactly where I was. We’re going to build the wall. We’re going to build it across the entire border.”
* * *
Zach Fuentes, Kelly’s assistant, warned the senior staff in the West Wing that Kelly had a short attention span and was easily distracted.
“He’s not a detail guy,” said Fuentes, who had also been Kelly’s assistant at Homeland Security. “Never put more than one page in front of him. Even if he’ll glance at it, he’s not going to read the whole thing. Make sure you underline or put in bold the main points.” However there were some subjects, particularly about the military, Fuentes said, that would engage Kelly’s full attention and he might want to have a long conversation.
Normally, Fuentes said, “you’ll have 30 seconds to talk to him. If you haven’t grabbed his attention, he won’t focus.”
* * *
Kelly held regular senior staff meetings of the 20 top people from the White House every Monday, Wednesday and Friday in the Roosevelt Room. He frequently reviewed his conversations with the president.
“I talked with the president over the weekend,” Kelly recounted at one meeting. “He’s really hot on getting us out of the Korean Peninsula altogether. Forcing the South Koreans to pay for THAAD. I’ve just been going back and forth with him, and I’ve really laid into him and told him he couldn’t do this.”
As Kelly himself got caught in the Washington political crossfire and was criticized in the media, he spoke more and more about the press and his own role at the senior staff meetings.
“I’m the only thing protecting the president from the press,” Kelly said at one meeting. “The press is out to get him. They want to destroy him. And I’m determined to stand in the way, taking the bullets and taking the arrows. Everyone’s out to get us.
“The press hates him. They hate us. They’re never going to give us a break on anything. It’s active hostilities. And so that’s why we’re taking all this incoming. They’re also turning on me because I’m the one guy standing in front of the president trying to protect him.”
In a small group meeting in his office one day, Kelly said of the president, “He’s an idiot. It’s pointless to try to convince him of anything. He’s gone off the rails. We’re in crazytown.
“I don’t even know why any of us are here. This is the worst job I’ve ever had.”
* * *
Kelly began to have less control, less involvement. Trump called members of Congress when Kelly wasn’t around. He called Chuck Schumer, Tom Cotton, Lindsey Graham, Dick Durbin or cabinet members, underscoring that he was his own chief of staff and his own legislative affairs director.
“Madeleine,” he would call out, “get Speaker Ryan on the phone.”
Trump’s questions started. “How’s Kelly doing?” he asked Porter. “He’s tough but it kind of seems like he’s too tough. I don’t know that the staff really likes him that much.”
“I think he’s helped,” Porter answered. “Better to be feared than loved. But he’s got his limitations. I think he just needs to recognize them. And you do too.” Porter said he thought Kelly’s weakness was on legislative matters. “You really need a good political affairs director because that’s not Kelly’s background. And if you want your chief of staff to be your chief political adviser, it shouldn’t be Kelly.”
* * *
Tillerson complained to Kelly many times about Porter getting Trump to sign decision memos without a sign-off from the secretary of state.
“I know you’ve been trying to loop Rex in,” Kelly told Porter, “but now you cannot take a decision memo to the president—you can’t brief the president on something like that—unless you have explicit sign-off.” Kelly made clear that feedback from State in general or from Tillerson’s chief of staff would not be sufficient. No decisions, Kelly instructed, “until you’ve talked or emailed with Rex specifically.”
Trump heard about the conflicts. He liked aggressive disagreements. They smoked out a wide variety of opinions. Harmony could lead to groupthink. He embraced the chaos and churn beneath him.
* * *
At about 9 p.m., Monday, November 27, more than four months after Priebus left the White House, the president reached him on his cell phone. They talked for 10 minutes.
What about the upcoming Senate race in Alabama? Trump asked. How was the ocean cruise that Priebus had just been on? Trump said it was amazing how much they got done together in the first six months. What about tax reform? And the Republican senators who were holding out on tax reform? Trump said that the stories The New York Times had that week were nuts.
How do you think Rex is doing? Trump asked. You think he gets it?
Priebus was careful. He thought Tillerson should have been great, but he was hard with the president. And the president didn’t like hard.
But the call was not heavy, as if Trump wanted someone to shoot the shit with. Kelly was all business. Kelly would not sit and BS.
The president invited Priebus to lunch at the White House for Tuesday, December 19. Now as a private attorney his proximity to the president and his well-publicized meetings were useful with his private clients. The world knew Priebus was still a player for sure. However, the president’s questions about Tillerson reminded Priebus of all the times he learned that Trump had sounded out others
about him: How do you think Reince is doing?
It was a bad memory. Trump was always asking everyone their opinions of everyone else, seeking a report card. It was corrosive and could become self-fulfilling—undermining and eating at the reputations and status of anyone and everyone.
“The president’s MO is to put people back on their heels,” Priebus said. “Put all the chips on the table. And then slowly but surely pick off each chip individually.” It could be a person, a policy, a country, a foreign leader, a Republican, a Democrat, a controversy, an investigation—Trump would try to leverage anyone, by any means, and at times he would succeed. “He uses leverage in a way I’ve never seen before.”
CHAPTER
35
Now that he had agreed to stay to do tax reform, Gary Cohn had to deliver. The current U.S. corporate tax rate was 35 percent, one of the highest in the world. Reducing it had been a rallying point for Republicans and businesspeople for years.
It was all Trump had wanted to talk about at first. During the Bush and Obama years, dozens of large companies had moved their headquarters overseas to take advantage of lower foreign tax rates. This process was known as inversion because it typically entailed creating a new parent company in a low-tax country like Ireland and making the existing American company its subsidiary. This was a big issue with Trump’s business friends. Lowering the corporate tax rate could bring trillions of dollars back to the United States.
“The corporate rate’s got to be 15 percent,” Trump said.
“Sir,” Cohn said, “we’ll try and get that.” Treasury Department calculations showed very few corporations paid the full 35 percent because of various loopholes and special tax breaks that Congress had passed.
Cohn agreed that the U.S. was out of sync with the rest of the world. Some countries, like Ireland, had a corporate tax rate as low as 9 percent. “So bring the money back home,” Cohn agreed. “Trillions of dollars are parked offshore to avoid U.S. higher tax rates.”
About $4 trillion, Trump said, even more—possibly $5 trillion.
Cohn had a chart that showed it was $2.6 trillion.
At one point the president proposed raising the top income tax rates—currently 39.6 percent at the highest bracket—for earners in exchange for drastically lowering the corporate rate.
“I’ll take the personal top rate to 44 percent if I can get the corporate rate to 15 percent,” Trump said.
Cohn knew that was crazy, though he realized Trump, with all his real estate and other deductions, had probably never, or rarely, paid the full 39.6 percent.
“Sir,” Cohn continued, “you can’t take the top rate up. You just can’t.”
“What do you mean?”
“You’re a Republican,” explained Cohn, who was a Democrat. Republicans were always for lower personal income tax rates. Republicans were the party of Reagan, who had lowered the top federal income tax rate from 70 percent to 28 percent. “You will get absolutely destroyed if you take the top rate up.”
Trump seemed to understand.
Cohn had a packet of Goldman Sachs–style charts and tables to educate the president on taxes. Trump was not interested and did not read it.
At a meeting in the Oval Office, Trump wanted to know what the new individual income tax rates would be.
“I like these big round numbers,” he said. “Ten percent, 20 percent, 25 percent.” Good, solid numbers that would be easy to sell.
Mnuchin, Cohn and Office of Management and Budget Director Mick Mulvaney said there needed to be analysis, study and discussion on the impact on revenue, the deficit and the relation to expected federal spending.
“I want to know what the numbers are going to be,” Trump said, throwing out numbers again. “I think they ought to be 10, 20 and 25.”
He dismissed any effort to crunch the numbers. A small change in rates could have a surprising impact on taxes collected by the U.S. Treasury.
“I don’t care about any of that,” Trump said. Solid, round numbers were key. “That’s what people can understand,” he said. “That’s how I’m going to sell it.”
* * *
The central feature of Cohn’s tax reform packet was on the first page: “Increasing economic growth from 2 percent to 3 percent” would create $3 trillion in budget savings over 10 years.
“Sir, if we can get from 2 to 3 percent, that’s all we’ve got to do, we could pay for the tax plan,” Cohn said. The more economic growth, the more taxes the government would collect. Simple in theory, but it would be hard, perhaps impossible, to get 3 percent growth—often a Republican fantasy.
Trump liked the idea. He was infatuated with the simplicity and started using variations of high economic growth in speeches.
Cohn tried to explain that during the Reagan era the U.S. economy had been very competitive and other countries had begun cutting their taxes. There was plenty of history and technical detail.
“I don’t give a shit about that,” Trump said.
* * *
On Monday nights, Speaker Paul Ryan hosted an Italian buffet in his conference room for the six main tax reform players representing Congress and the administration. Known as the “Big Six,” they were Ryan, McConnell, House Ways and Means Committee chairman Kevin Brady, chairman of the Senate Finance Committee Orrin Hatch, Mnuchin and Cohn. The group was a Democrat’s nightmare—five conservative Republicans and the former president of Goldman Sachs revising the tax code.
The group came up with four principles: simplification of the tax code, tax relief for middle-income families, job creation and wage growth, and bringing back and taxing the trillions of corporate dollars stashed overseas.
Cohn’s approach to the congressional leadership was to treat them like gold. In his decades in the client service business at Goldman, everyone was treated as the most important client. He had told his clients there, “I’m available 24/7. You want to talk, we talk.” The customer was always first, and only the customer counted. Now the congressional leadership was, for the moment, the only customer.
Mnuchin had alienated some Republican House members early on in the administration by insisting they had to vote for certain continuing budget resolutions and for the debt ceiling, the limit on how much the government could borrow.
OMB director Mick Mulvaney, who had served six years in the House, reported to Cohn that one Republican told Mnuchin: Mr. Secretary, the last time someone told me what I had to do, I was 18. It was my dad. And I never listened to him again, either.
Later, Mnuchin proposed capping the amount of business income a taxpayer could pay at the lower personal income tax rates—known as “pass-throughs.” He said some 95 percent of the pass-through tax returns were below $350,000 in annual income.
No, Ryan and Brady said. That was the dumbest idea they had ever heard. Mnuchin had not accounted for the other 5 percent of pass-through tax returns, which included huge mega-donors to the Republican Party like the Koch brothers.
Mnuchin went behind Ryan’s and Brady’s backs to try to enlist some House Republicans.
Mulvaney threw a note on Cohn’s desk: If you want to get tax reform done, keep Mnuchin out of the Capitol.
Cohn reported this to Kelly. As the tax negotiations intensified in November, Mnuchin went on a tour of the country, speaking and selling the tax plan alongside Ivanka in California on November 5 and 6 and New Jersey on November 13, and on his own in Ohio on November 14.
On the Senate side, Finance Committee chair Orrin Hatch put together a group made up of Senators Pat Toomey of Pennsylvania, Rob Portman of Ohio, Tim Scott of South Carolina and John Thune of South Dakota to handle the negotiations on his behalf, since he had a relatively limited knowledge of tax policy. Cohn was on the phone nonstop with these senators.
* * *
Cohn discovered how challenging tax reform could be. One of his charts was titled, “The Federal Income Tax System Is Very Progressive.” He believed it was another important chart; it showed the big picture, t
old the whole story. Forty-four percent of Americans did not pay federal income tax.
During the 2012 presidential campaign, when the percentage was higher immediately following the Great Recession, Republican nominee Mitt Romney was recorded saying disparagingly, “There are 47 percent who are with [President Barack Obama], who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it—that that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what. . . . These are people who pay no income tax. . . . My job is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.”
While most of the 44 percent paid payroll taxes on their wages that went toward Social Security and Medicare, as well as state, local, property and sales taxes, they paid zero dollars in federal income tax. That meant the federal government brought in revenue for its budget from only 56 percent.
Many low-income people paid less than zero, Cohn’s slide showed. Their income was so low that not only did they owe the government no federal income tax, they cost the federal government revenue because it gave them refundable tax credits—money from the government—like the Earned Income Tax Credit and the Child Tax Credit.
Ivanka Trump worked with Senators Marco Rubio and Mike Lee to increase the Child Tax Credit from up to $1,000 per child to $2,000. Rubio and Lee would not vote for the final tax package unless this was included. “We had to buy their votes,“ Cohn said. “We’d been extorted by Lee and Rubio.” He believed the federal government had conflated taxes and welfare, and, of course, was using tax legislation to help the poor.
