The Daily Bell is pleased to present this exclusive interview with Steve Forbes.
Introduction: Steve Forbes is Chairman and Chief Executive Officer of Forbes Media and Editor-in-Chief of Forbes magazine, the company’s flagship publication. Forbes is the nation’s leading business magazine with a circulation of more than 900,000. Steve Forbes writes editorials for each issue of Forbes under the heading of “Fact and Comment.” A widely respected economic prognosticator, he is the only writer to have won the highly prestigious Crystal Owl Award four times. Steve Forbes was a Republican candidate in the US presidential primaries in 1996 and 2000.
The Internet site, Forbes.com, averages 35 million unique monthly visitors and has become a leading destination site for senior business decision-makers and investors. Other Forbes Web sites are: RealClearPolitics.com, RealClearMarkets.com and RealClearSports.com. Together with Forbes.com, these sites reach nearly 40 million business decision-makers each month. Mr. Forbes serves on the boards of The Ronald Reagan Presidential Foundation, the Heritage Foundation and The Foundation for the Defense of Democracies. Mr. Forbes is co-author of the new book, Freedom Manifesto: Why Free Markets are Moral and Big Government Isn’t (Crown Business).
Daily Bell: Thanks for sitting down with us again and answering the tough questions. Please answer as if readers were not aware of your famous magazine, your articles or your frequently quoted opinions.
What happened to GOP presidential candidate Mitt Romney? Did he run a good race?
Steve Forbes: To define what happened, he didn’t define himself and his agenda. When you don’t do that or don’t do it skillfully enough the other side will do it for you. The campaign made a major mistake by not responding to the Democratic attack ads in the spring and summer, after he secured the GOP nomination. Even though Romney did very well on the first debate, as Ed Rollins said, “He made himself a credible alternative to Obama but not necessarily the better alternative.” As Reagan demonstrated in 1980, it’s not enough to run against a bad economic record; you have to have a positive alternative, an exciting, forward-looking one. Romney had some good ideas but they almost came across as a footnote rather than something he led off with, and I think ultimately that cost him the election.
Daily Bell: What do Republicans need to do now? Do they need a bigger tent?
Steve Forbes: The way you get a bigger tent is by getting your pro-growth, pro-positive future message out. Whether it’s reforming the tax code, positively reforming entitlements, instituting a sound money policy including a re-link to gold, stopping the binge spending, you must put forth those principals and policies in a way that demonstrates these are the best ways to enable people to get work, improve their skills and, as Lincoln put it, “improve their lot in life.” The tent will expand because people want to move forward in a positive way.
Daily Bell: Is the Tea Party dead? What does it stand for? Was it taken over by the GOP establishment?
Steve Forbes: The Tea Party certainly participated in the election cycle but I think they are really going to be revved up now, particularly as ObamaCare comes to the fore again. One of things that we suffered from with Mr. Romney’s candidacy was that ObamaCare was not put out there as an issue. The governor said he wanted to repeal it and he pretty much stopped at that. As ObamaCare begins to be implemented, I think we are going to see another fierce reaction, as you saw when the thing was passed in 2009 and 2010. So the Tea Party is coming back again and those who think it is going into the deep freeze are in for a surprise.
Daily Bell: Are you worried about a fiscal cliff disaster?
Steve Forbes: I think they will avoid a formal fiscal cliff but the question is how bad of a price we are going to pay for it. Taxes will be going up and that’s not going to be a good thing for the economy.
Daily Bell: What will Obama do in his second term?
Steve Forbes: More first-term on steroids. He won’t be able to pass through Congress any major initiatives except for perhaps on immigration reform but the regulatory agencies will be very active. The EPA will do all it can to do things like put regulatory burdens on fracking and continue to destroy the coal industry. I think Obama will continue to spend as much as possible. He’ll do what he can to gut national security. So it’s not going to be a pleasant time but I think he will do what sometimes second-term presidents do, including Franklin Roosevelt – overplay his second hand.
Daily Bell: What is the Democratic agenda?
Steve Forbes: Making big government bigger and raising taxes in the process. They have learned nothing from the 1930s.
Daily Bell: What are your overwhelming political concerns these days? Are you still worried about Barack Obama and his policies? You don’t seem to trust him, according to your previous interview.
Steve Forbes: I hope he changes but I see no evidence of it. His raising the stakes on how much he wants taxes to go up demonstrates that he thinks he has the whip hand. So I think we have to prepare for a long, hard fight and learn to do better in terms of getting a positive message across.
Daily Bell: Is Barack Obama a legal president? Is his birth certificate legal? Why should we believe this administration about anything?
Steve Forbes: Well, I think he was born in the US but I worry about less about that issue than what he is doing now. We had an opportunity to get him out of office and, sadly, that opportunity was missed and the country is going to pay a price for it.
Daily Bell: Should the Republicans have run Ron Paul?
Steve Forbes: I think the Republicans need to get a Reaganist candidate. I think we have a very good bench now. We have Rand Paul coming along, we’ve got others like Marco Rubio and we have high hopes for Mike Pence, governor of Indiana, so I think there will be plenty of strong candidates in 2016. I think the lesson from 2012 is you have to have that positive, liberty-based agenda to win the elections. If you mute that agenda we will get muted out of office.
Daily Bell: Why did the GOP force Ron Paul out of the race?
Steve Forbes: I think Congressman Paul unfortunately could not get across a message that could win him the nomination. One can dissect a campaign but it didn’t work. I think circumstances are going to make the monetary issue come to the forefront as the Federal Reserve continues its insane policies of trashing the dollar. So we will see what happens to Rand Paul but I think Ron Paul will be seen as a man doing the Paul Revere on monetary policy. Unfortunately, it’s going to take years and not just one night to get the message out.
Daily Bell: Why are the Republicans so protective of the military and the Pentagon in particular?
Steve Forbes: I think the desire for a strong defense is a sound one and the debate comes on the particulars. I think a lot can be done in the future. Our procurement system hasn’t been reformed in half a century and there’s a lot that can be done there. Americans like the idea of defending ourselves, and the debate should come not on the need to defend ourselves but rather on how we use the assets and how we deploy the resources that we devote to defense.
Daily Bell: Why did the current government declare a Constitution-free zone between Canada and the US? Is it necessary?
Steve Forbes: We are not going to try to do what the EU did because you can get the benefits of reducing economic barriers without trying to force a political union. Canadians would probably object more than we would; they have no desire to be ruled by Washington. That was settled in the War of 1812. Whoever wants to try anything like that should look back at 1812. The Canadians and the Brits ended up burning Washington, which might not be a bad thing but that’s not the way to go about it.
Daily Bell: Is it the beginning of a North American Union between Canada, the US and Mexico? Is that just conspiracy talk?
Steve Forbes: The only way a political union can be effected is with the consent of the governed and Mexican nationalists are not going to put up with it and Canadian nationalists are not going to put up with it. But we reduce barriers in doing commerce and we all benefit in that. So in that sense we can set the right model for the EU on how to do these things. The US has to start setting a good example again. One of the things that has not happened in the US in recent times is to expand teachings of history and even specifics about what our Constitution is about, checks and balances, federalism and the like. There’s a lot of educating that has to go on with the young and middle-aged. It’s incredible that students don’t get an understanding of what makes this country unique.
Daily Bell: Are civil liberties eroding in the US? Was the Patriot Act constitutional?
Steve Forbes: So far its role has been constitutional but the assault is now going on in all sorts of areas. We finally got a good decision against the Army Corps of Engineers a few months back in terms of the gross abuse of the Wetlands Act. But the assault now with Obama within these so-called independent agencies is going to be unrelenting and that’s going to be a huge battleground. They are going to push everywhere and take the attitude, “If you don’t like it take us to court” and it will be a few years before you can do anything about it.
Daily Bell: Would you consider running for president again?
Steve Forbes: I am an agitator not an office seeker. There’s simply a lot more to agitate about now.
Daily Bell: How has Forbes magazine been holding up given the economic crisis? Is American media generally bouncing back?
Steve Forbes: It’s a very checkered thing. The nice thing about the web is you have more people involved and creating more information than ever before. The challenge for media is that the old model that worked for 150 years has been shattered. We have totally redone and revolutionized the way we do content creation. We now have about 850-1,000 contracted contributors for Forbes.com and 98% of our content now appears on the Web but not in the print magazine, so that world is changing. Our revenues this year thankfully are up double digits from last year and let me tell you, it is still a very, very tough environment. It just goes to show, as the saying goes, you can either eat well or sleep well but not both.
Daily Bell: Will Forbes end up being completely electronic? If so, will you miss paper and ink?
Steve Forbes: The answer to that is that it will be determined by our visitors and readers. The market will dictate the tools as to how we get our content out. We can have ideas on it but you have to meet the wants and needs of the people you serve and if you can do that you will do fine.
Daily Bell: Is the Internet starting to be controlled by governments generally? Is the US government after the Internet?
Steve Forbes: Government, big government – and I emphasize big government not small “G” government – big government is using every excuse it can to get its claws on the Internet, especially the Federal Communications Commission. Some of the efforts have been beaten back but they are going to try it again. Needless to say, organizations like the UN and other international bodies will try to get their claws in, too.
Daily Bell: As a self-admitted Austrian economist, and obviously a skilled one, do you have plans to educate readers directly about Austrian economics on your Web site or in your famous magazine?
Steve Forbes: I try to promote free-market economics every chance. In addition to chucking our tax code, one of the key issues in the next few years will be getting this country on a gold standard. That’s just beginning but, sadly, I think circumstances are going to propel this happening.
Daily Bell: All right, then … you beat us to it. Should the West return to a gold standard and in the process do away with central banking?
Steve Forbes: Well, if you do the gold standard right, you can keep the central bank so they can have a place to show up for work and not do too much harm, as long as it’s clearly defined that gold is fixed to a certain price and the value of the dollar is fixed to gold. I think it was Robert Mundell, Nobel prize-winning economist, who said, “When you do it right a monkey could run the system.” I would be gentler and say that a high school student could do it. As for the Ph.D.s, I would take pity on them and let them play with their models during the day.
Daily Bell: Should there be private competitive currencies?
Steve Forbes: Yes. You should not face the prospect of jail if you decide to issue a piece of paper that is backed by gold and if people want to do contracts they should be free to do so. Let it go from there. I don’t think it’s going to be easy to do but the barriers need to be removed, meaning the tax barriers. As it stands now, if I sell a dollar for four quarters that’s considered a tax-free exchange but if I buy an ounce of gold, that is considered a taxable event. So we should remove all taxes on transactions of gold and silver.
Daily Bell: What do you think of the Libor scandal? Central banks fix the price of money every day so why is the Libor scandal so terrible?
Steve Forbes: I think, clearly, interest rates should be set by the market, meaning people. One of the things that’s very destructive is what the Federal Reserve has done now: If you fix a price in the private sector, of course, you go to jail. Yet in Washington, they hail you as a hero when you do things like quantitative easing, which is a fancy word for fixing the market and debauching your currency. That has been extremely destructive. We should let the markets set prices. We should have learned that from the Romans.
Daily Bell: Are regulations good and necessary for a free market? Are regulations inevitably price fixes? Aren’t price fixes distortive?
Steve Forbes: You need rules of the road, such as you don’t go 100 miles an hour in a school zone, but that’s very different from telling me what to drive, when to drive and where to drive, which is what drives this current regime. People are going to want rules such as you can’t sell them bad meat and stuff like that and making sure that fraud is not allowed. Often that’s enforcement. Unfortunately, every time you get a big scandal, the response is to create a bunch of new laws whereas most of the time if they’d just enforce the existing ones, we’d do very nicely, thank you very much. Fraud is fraud.
Daily Bell: What about the euro and the EU? Are we headed toward a global recession?
Steve Forbes: The European Union is unfortunately engaging in economic policies that remind you of what happened in the 1930s, not in the sense of blowing up the global trading system as we did then but in the sense of piling on taxes in the private sector instead of bringing about change in the economy. Instead of bringing about change in the public sector, they simply put more burdens on the private sector and then wonder why their deficits go up as revenues decline. France is about to put in a top 75% income tax rate, Spain has already raised theirs to 52%, raising their VAT and raising other levies, and it’s a deadly spiral. My advice to them would be ‘Stop’ and ‘Retreat’ and let people breathe again and they will recover.
Daily Bell: What about China? Where is it headed?
Steve Forbes: Well, China has some big decisions to make in the coming years. The real energy of the Chinese economy is the 40+ million small businesses they have. Many of them operate in the twilight zone legally. The key challenge for China if it wants to grow and be an innovator, is providing a legal framework and an institutional framework where small entities can come into their own, grow and become tomorrow’s big companies. The tendency will be to favor state owned enterprises and if that happens in China it’ll eventually stagnate.
Daily Bell: Do Russia and China pose a threat to the dollar reserve currency?
Steve Forbes: Only if they link their currencies to gold and make it easy to trade their currencies. They haven’t done any linking yet but we will see what they do. They are gingerly toying with it but they haven’t done it.
Daily Bell: Is the dollar dead in the long run? In the short run?
Steve Forbes: No, the dollar can be revived tomorrow but that’s sadly going to take Ben Bernanke pursuing new opportunities, which doesn’t look like it’s going to happen immediately. But a currency can come back. It’s like when you get overweight; you can whip yourself back into shape. In fact, it’s easier to get back on gold than it is to lose 20 pounds.
Daily Bell: What are the most important seminal articles that you would encourage everyone to read? Where can they be found? (You said Forbes last time.)
Steve Forbes: Well, Forbes.com. We have a great stable of writers like Nathan Lewis and others writing about gold and other issues, trying to battle the ever-bloated Leviathan. Take comfort that the intellectual movement has begun and Ron Paul will be seen as one of the pioneers. Unfortunately, pioneers get the arrows but they do deserve due honor.
Daily Bell: Any last thoughts? Last time you said citizen agitation was laying the groundwork for fundamental free-market change. Have you changed your mind?
Steve Forbes: No. It just goes to show if you mute your message you are not going to win. I also just co-authored a book called Freedom Manifesto: Why Free Markets are Moral and Big Government Isn’t. Sadly, that is going to be a battle we’re really going to have to fight now.
Daily Bell: Thank you for taking time to address important free-market philosophical questions. It’s a pleasure to speak with you.
Steve Forbes: Very good to speak to you.
It is obvious from his answers, for instance, that this publisher of one of the US’s last, private, old-line media conglomerates believes Rand Paul is a more palatable option for the GOP than his flame-throwing father.
Steve Forbes also makes it clear that a version of the Tea Party – controlled or not – is going to be resurgent as a result of Obama’s victory. It is also interesting how confrontational he appears to be when it comes to President Barack Obama’s next four years.
He returns to issues we’ve discussed before regarding a formal gold standard but also allows that competitive currencies generally are a positive option. We’re on record, of course, as suggesting that a formal (state mandated) gold standard need NOT be imposed but that simply freeing people to use whatever money they wish is the best approach.
But obviously, a gold standard is under discussion at the highest levels and this doesn’t surprise us. What does surprise us is Mr. Forbes’s outright dismissal of the possibility of a North American Union. He seems to believe it is not feasible because of the antipathy of the nationalities involved. But when has that made a difference to those who come up with these strange schemes?
Obama’s first term was marked by extreme rhetorical statements from “the right” (as well as from libertarians). But if Mr. Forbes is to be believed, the upcoming four years are going to be even harsher.
We would tend to agree with that.
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