I.O.U.S.A. (62 page)

Steve Forbes:
Well, Alan Greenspan was a good crisis manager, especially when things went wrong in Asia and Russia. When we had a stock market crash in 1987, he was right in there making sure that panic didn ’ t spread. But his greatest failure was he was like a pilot who didn ’ t fl y with instruments. He had good instincts, but if you ’ re fl ying by the seat of the pants and you get some adverse weather, sometimes you ’ re going to hit a tree. As a result, he left no legacy to a successor on how to properly conduct monetary policy. Imagine driving a car without a speedometer and without a fuel gauge. You ’ re always going to be wondering if you are okay. Well, your instincts may be pretty good on when you ’ re running low on gas or when you may be going too fast, but not always. So he didn ’ t provide the speedometer, he didn ’ t provide the fuel gauge.

What ’ s the best speedometer, fuel gauge for monetary policy?

Look at the price of gold. If it ’ s zooming up, that means you ’ re printing too much money. If it ’ s crashing down in price for a period of time, it means you ’ re printing too little money. Gold refl ects the markets. Let markets tell the Federal Reserve whether it ’ s doing its job right or wrong instead of always guessing what is the right interest rate and getting sidetracked on things that you shouldn ’ t be concerned about. Keep the dollar value stable. Tie it to the price of gold or to a range, a little bit of fl exibility. You ’ ve got to give these people something to do each day, but have that kind of gauge. Then guess what? You don ’ t make huge mistakes like we have today with oil zooming up and other crises out there.

That kind of instability hurts. We want stability, not instability. We don ’ t want infl ation or defl ation.

Q:
As a holder of some dollars, is the value of the dollar starting
to depreciate at a rate that is of concern to you?

Steve Forbes:
The dollar should never depreciate or appreciate.

It should be stable in value. It should be fi xed in value. Say a foot c18.indd 253

8/26/08 7:21:03 PM

254 The

Interviews

has twelve inches; you don ’ t change that each day. It ’ s a fi xed measure. Same thing with an hour. There are sixty minutes in an hour, it ’ s fi xed. You don ’ t change the number of minutes in an hour each day. The dollar should have a fi xed, basic value. Gold, for all its imperfections, is like a Polaris. It ’ s the best thing we have out there. Experience shows that. Keep the dollar stable in value and then you can focus your energies on more productive things like innovating, starting a business, building a house, being responsible, moving ahead in life.

Q:
When the dollar is not pegged to any commodity, when you
can just print the paper, what is the result of just expanding the
dollar supply on value?

Steve Forbes:
If you don ’ t have a currency that is fi xed and has a fi xed measure of value, then the temptation always is to reduce the content. Politicians love to spend and they hate the idea that there ’ s any discipline out there. So without discipline, guess what happens? You get infl ation, you get chaos, you undermine it.

Lenin said the best way to undermine a society is to debauch the currency because not one in a million people understand what is happening. Infl ation is great for those who want terrorism, for those who want totalitarianism, for those who want chaos. That kind of chaos is the enemy of freedom. Stability is the friend of freedom; chaos is the enemy.

Q:
Given that, how dangerous is our profl igate spending to
creating the infl ation that could create chaos?

Steve Forbes:
The spending is not just a monetary issue.

Spending is a moral issue. You ’ re taking money from people and wasting it. People are forced to give money to the government, presumably in return for services. As we said in our Declaration of Independence, people give money in order to secure certain rights. Period. Not to waste on all the other stuff they ’ ve gotten into. And then liberals will say, “ Well, you mean you want to take away Social Security? ” No, we want a system where people own the assets so they truly have something of true value there.

They ’ re not burdening other generations. They ’ ve earned it c18.indd 254

8/26/08 7:21:03 PM

Steve

Forbes

255

and built it so the assets are there. They can have a far better, richer retirement than they could if the politicians control their money. This is the way you avoid chaos, by emphasizing
we.
We do better when matters and money are in the hands of “ we the people, ” and not politicians who have no sense of restraint or discipline.

Q:
What do you think is the greatest threat to the stability of the
United States at this point?

Steve Forbes:
The greatest threat to the stability of the United States is not the kind of murderous fanaticism or terrorism that we see in the world today. Eventually, I believe that we will learn to beat it. It may take time, but we will do it as a free people. The real threat is bad ideas. A lot of bad ideas came out of the Great Depression: that government could be a stabilizer of the economy, and that government could do better than free markets. We ’ re recovering from the devastation of the Great Depression, but bad ideas are always out there. Not fi ghting these bad ideas and bad conventional wisdom, are the things that can ultimately undermine a society.

Q:
How big a mess are we facing with the major entitlement
programs — Social Security and Medicaid?

Steve Forbes:
Well, the problem with entitlements is that someday you have to pay for them. And if you haven ’ t built the assets to pay for them, then you ’ ve got a big problem. I think that ’ s why it is important to establish Social Security reform that doesn ’ t appear to take something away from grandma, while actually helping younger people with their own personal retirement accounts. You change the entitlement to something where people feel they ’ ve earned it. Part of the problem with Social Security is people who are on it felt, “ Well, we put money in the system, but the politicians mishandled it. ” These people feel cheated and deceived. Now we ’ re fi nally going to tell the truth to younger people. “ The money that you put in is actually yours. It ’ s not been stolen by politicians. ” The truth is the only way you fi ght these things.

c18.indd 255

8/26/08 7:21:04 PM

256 The

Interviews

Q:
In looking at history, truth is perhaps the rarest commodity
on the American political scene. Does it take a crisis before
American people will actually be ready for the truth and ready
to act on the truth?

Steve Forbes:
With human nature being the way that it is, people do not like to do unpleasant things unless they have to. Kids don ’ t like to clean their rooms unless their parents say, “ You ’ ve got to do it or you ’ re not going to get something. ” That ’ s human nature.

But I think people now know that something is not right with the system. And if we get the leadership, and the people themselves say, “ Here ’ s the proper way to do it, ” we can deal with it. In terms of health care, people know the system seems to have higher and higher costs. Yes, we ’ ve got great new stuff coming, but it seems to get more and more expensive. Why does health care get more expensive whereas in everything else in life — the amount we spend on basic food goes down so we get more, fancier food; we have lower prices for computing power. Why can ’ t we get some of these kind of productivity gains in health care? You ask that question and then it quickly comes back: It ’ s because people don ’ t control the resources. Our resources are taken from us and then we ’ re told we ’ re getting something back for free. It ’ s a great gain. Take a dollar, give you back 50 cents, and you ’ re supposed to be grateful.

Q:
The idea of a fl at tax that you ’ re talking about, is that
something that would help us pay off this $ 9 trillion that ’ s
sitting there so that we wouldn ’ t be spending all that money on
debt service and we could actually rebuild the infrastructure? Is
the fl at tax a good tool toward that?

Steve Forbes:
The fl at tax wins on all fronts. It ’ s a great blow against political corruption and a great blow against the current system of a tax code that brings out the worst in people who are always thinking, “ Do I get a deduction here, do I get a deduction there? ” Instead, the fl at tax enables us to do things for the right reasons instead of the wrong reasons. And fi nally, and very importantly, it means more economic growth. It means higher asset values. Ask yourself, why did housing prices go up starting in 1998? It ’ s because there was a change in the tax code that, in c18.indd 256

8/26/08 7:21:04 PM

Steve

Forbes

257

effect, removed the capital gains tax on your primary residence if you sold it. Suddenly you did not have a capital gains tax. When you remove a tax on something, the value of it goes up; very, very basic. So by lowering tax rates, by making it simple so that people can actually understand what ’ s happening to them, we have a better civil life, we have a better political life. We also have a stronger economy, higher assets, more businesses, and better jobs being created.

Q:
If we talk about the United States not as an ambitious empire
looking to conquer territories — in the most positive sense, we
keep the shipping lanes of the world open for trade — what is
the biggest threat to the United States? Is it this out - of - control
spending? Is it the lack of political courage? What are you most
concerned about?

Steve Forbes:
What most concerns me is not the specifi c problems like out - of - control spending and the war on Islamic fanaticism.

What concerns me is that if we as a free people have the spirit, the stamina, the orientation to do something about them. Human nature being what it is in the world is always going to face challenges, especially preserving freedom. Jefferson said it requires eternal, constant vigilance. I sometimes wonder if we ’ ve lost that vigilance. I don ’ t think we have, so I ’ m an optimist. So when specifi c things come along and we have an out - of - control political culture, we as a free people have to do something about it. If we haven ’ t lost the spirit which founded this nation and if we can keep that spirit going, we ’ ll be able to deal with these problems and pursue opportunities. So it ’ s not specifi c things per se; it ’ s whether we as a free people can summon the will to deal with them.

Q:
Many doom - and - gloom experts say that things aren ’ t going to
change, that people are going to continue to spend what they
don ’ t have and make bad decisions based on the leadership
we have. Is that a fair assessment of the way the United States
seems to be going?

Steve Forbes:
Well, as a free people, we in the United States will make mistakes. The key is do we have the fl exibility, the adaptability, and the willingness to do things to deal with things c18.indd 257

8/26/08 7:21:04 PM

258 The

Interviews

when they go wrong? In the ‘ 60s and ‘ 70s, for example, we took a real hit from Japan. We had the fl exibility to say, “ What are they doing right that we ’ re not doing? ” As a result, Japan ’ s the country that went into a 10 - year recession as we moved ahead in areas of high technology and biotechnology. Japan ’ s now just starting to come to life again.

So yes, things are going to go wrong. We will make mistakes, but the key is that we must have the fl exibility, the adaptability, the can - do attitude that says, “ We ’ ve got a problem here; we ’ d better do something about it. ” So rather than get doom - and - gloom message out to people, there are various other ways you can get information out there. But if you don ’ t make the effort to get the information out and say, “ Hey, [we] may have a problem here that if left untended is going to have real repercussions, unpleasant ones, ” guess what? The repercussion, the bad things will happen. So I ’ m delighted people are saying, “ We have problems out there, ” or “ Well, if this is a problem, we ’ ll deal with it. ”

Q:
What do you think the United States government has done best
in the past 25 years?

Steve Forbes:
I look to Ronald Reagan coming into offi ce in 1981, faced with a malaise in the United States, a Cold War that was going against us, revolutions in Iran, Nicaragua, and anti - U.S. sentiments everywhere. And he said, “ If we go back to our principles and have that kind of forward - looking optimism, we can do it. ” And in eight years, the United States economy ’ s growth exceeded the entire German economy; just as in the last three years the expansion of the U.S. economy exceeds the entire size of the Chinese economy. Nobody knows that. We won the Cold War; people thought that was going to go forever, but we won it. Now, did we have problems in that era? Yes, but on big things, we did it right, so why can ’ t we have that kind of Reaganist approach again? Sure, nothing ’ s ever going to be perfect, that ’ s not for this world, that ’ s for another world; but by golly, we can get a lot of glorious things done with that kind of can - do American Reaganist spirit.

c18.indd 258

8/26/08 7:21:04 PM

Steve

Forbes

259

Q:
Should we be back on the gold standard?

Steve Forbes:
Should we be back on the gold standard in terms of having a pile of gold? No. All you need to do is look at the price of gold and base your monetary policy based on its price.

In short, I ’ ll pick a number, $ 400 an ounce. If it goes much above $ 400 an ounce, you ’ re printing too much money, so soak some of that excess money you spilt and mop it up. If it goes well below $ 400 for a period of time, you know you ’ re not creating enough credit for the needs of the economy, so you print a little more. You let the markets, the economy tell you what to do. You don ’ t try to second - guess what ’ s needed like setting interest rates and hoping you targeted it right. Markets will tell you.