A few simple steps by a relatively new, more conservative Congress would put not only our own economy on track, but the rest of the world as well, says Steve Forbes in this exclusive interview with MoneyShow.com.
What will the steps be in Washington in 2011—and 2012, leading up to the elections—to begin to bring real reform to the economy, to America, and for the markets?
I think on the regulatory side, I think you’re going to see is a push for, in the next year or so, a law that states that if an agency—even if it’s an allegedly independent agency—puts in a regulation costing more than $100 million, they’ve got to get approval from Congress. In other words, bring back accountability.
In the past, Congress loved to write these vague laws, throw it off to an agency or agencies and say, “Oh, those mean bureaucrats did this thing. Don’t blame me. Reelect me.” Now there’s going to be accountability. [This proposal, championed by the GOP for several years, was reintroduced with the new Congress as the REINS Act, and is currently in subcommittee hearings—Editor.]
I think there are going to be some real hearings on how to drastically simplify the tax code, so we get the mandate in 2012. And on Obamacare, I would hope that they would repeal that individual mandate even before the courts rule, just to have the Democrats have to go on the record: Do you want to have that kind of coercion or not?
It would pass the House. And remember, 23 or 24 senators from the other side, the Democrat side, come up for reelection in 2012. So put them on the record—Do you want to coerce people under a vague reading (or misreading) of the interstate commerce clause? The government can tell you to do anything it wants you to do?
Recently there was an amusing thing in South Dakota. Several legislatures said, if they can make us buy insurance for our health, why can’t we pass a law mandating that people must buy guns to protect themselves from criminals? Point made.
Right. Very, very good point. Well, how do you see the markets continuing to react to this? It looks like the global recovery that you predicted is happening ever since we convened here a couple of years ago, when we were looking at mark-to-market reform.
We got a little bit of that, and off the market started, and they seem to be running. What’s your view through this year, and into 2012?
Well, the US economy will grow in 2011—probably 3.5%, maybe 4%, probably create 2.5 million jobs, which all sounds great—but in terms of speed, after what we went through, we’re going about 40 miles an hour when we should be going about 70 or 75 miles an hour. So, the cheap dollar, the weak dollar, is still hurting the economy.
There’s remaining uncertainty on taxes, and the Bush tax rates. What’s going to happen there? We’ve got tax increases coming on Obamacare. I loved it when the President, the other day, said I haven’t raised taxes on anybody. Not true. He said it with a straight face. This was not an audition for being a comedian. He said it with a straight face.
And then you see what they’re doing on the regulatory side—all the massive rules coming with Obamacare. It’s no wonder we’re not doing even better.
And so, yes, job creation is going to be sub-par. The thing that I think they will acknowledge is that every net new job in this economy is created by companies under the age of five.
So you see the markets continuing to move higher, notwithstanding these issues that….
Well, sure, because the market is so low, as you know. We haven’t gone anywhere in real terms since the late 1990s, and in spite of all of the abuses heaped on the economy, we’ve had some extraordinary progress. Just one example: in telecommunications several years ago we were behind the rest of the world in broadband bandwidth. Now we’ve surged ahead of the rest of the world.
Government didn’t plan it. Nobody said we must do it. Entrepreneurs did it.
That’s fabulous. We spent some time together at your fabulous Forbes Asia CEO Summit, and there we listened to a number of fantastic CEOs, mostly from that part of the world.
India, China, and other parts of Asia are growing very rapidly. Do you see that continuing? Because we’re starting to hear worrying news about currencies, about them raising interest rates significantly to try to rein in growth.
Well, the big threat to growth is our government. The Treasury Department and the Federal Reserve have a policy of trashing the dollar. When you trash the dollars—since commodities are priced in dollars—that means higher food prices and energy prices.
It’s a pain in the neck for us—but in developing countries, boy that’s the difference between having a decent meal and going to malnutrition. That’s why you’re starting to get unrest in that part of the world. What is minor inflation for us is big inflation for them, because of the dollar.
And this idea that we must devalue the dollar…how is that different, Charles? Devaluing the dollar is a way of artificially increasing your exports. How is that different from manipulating tariffs and other protectionist measures? It isn’t. And so, that is a threat.
So if the US just simply stabilized the dollar, that growth you see in that part of the world would be on a much sounder footing and good for us.
You take countries like Indonesia, which is the fourth-largest country in the world in terms of population and biggest Muslim nation in the world. They now have democracy, have sunk real roots, are growing at a good rate, and want to become part of the global economy.
That’s good for a whole host of reasons. We don’t want to derail that because the Federal Reserve is on a bender.