Steve Forbes on Budget & Economy

Conservative economics: flat tax, less govt, Greenspan out

Forbes’s conservative economic message -- a call for a flat tax, less government, and the ouster of the Federal Reserve chairman, Alan Greenspan -- is proving to be a tough sell in one of the most robust economic cycles in this century. With the federal budget balanced, interest rates falling, the stock market hitting record highs, and federal taxes having been lowered, it is hard for Forbes to make much headway with his call for drastic economic reform.
Source: New York Times, p. A14 Dec 31, 1999

Fed’s bizarre theory: prosperity causes inflation

Q: What in your view has Mr. Greenspan done wrong? A: The foundations for today’s prosperity were laid by Ronald Reagan in the early 1980’s. Mr. Greenspan did a very good job in the early 1990’s. But recently he’s fallen prey to this crazy theory that prosperity causes inflation. So they’re trying to slow the economy down by raising interest rates. It’s like a doctor saying you’re in great health, so we have to make you sick a little bit. It’s a bizarre theory. It’s going to hurt our economy.
Source: Phoenix Arizona GOP Debate Dec 7, 1999

We should create wealth, not redistribute it

[We should] give all Americans the freedom to create real personal wealth for themselves & their families. Creating personal wealth-not redistributing it-should be one of America’s highest priorities as we move into the new century. The real source of wealth and capital in this new era is not material things-it is the human mind, the human spirit, the human imagination, & our faith in the future. That’s the magic of a free society-everyone can move forward & prosper because wealth comes from within.
Source: “A New Birth of Freedom,” p. 41-42 Nov 9, 1999

Link dollar to gold to avoid inflation

We need to keep the Federal Reserve from lurching into deflation or inflation. Remember, prosperity does not cause inflation. It’s time to link the value of our money to something stable and secure, like the price of gold. That will ensure that the Fed does not inadvertently put its thumb on the world’s windpipe, cause global currency turbulence, and cause commodity prices to be devastatingly low.
Source: “A New Birth of Freedom,” p. 177 Nov 9, 1999

Free markets, free elections, free trade, free people

[In a speech in London], Forbes made clear he considered the “Third Way” [the British term for mixing socialism & capitalism] a socialist approach. “Where some speak of a ‘Third Way,’ let us pursue the right way - free markets, free elections, free trade - because these are the tools of a free people,” he said. “It is time to show the world that the Reagan-Thatcher-Forbes model offers true economic liberation for those who languish in poverty and economic stagnation,” he said.
Source: Reuters Oct 13, 1999

Maintain budget caps until Social Security is saved

Forbes strongly opposes repealing the budget spending caps. The budget caps were put in place to limit government spending. Congress should not repeal them. Forbes believes it would be a huge mistake for Congress to break the caps before we save Social Security, simplify the tax code and reduce taxes. “Don’t back down in the face of mounting surpluses. Hold the line. Keeping the budget caps is the right way to provide a dramatic tax cut and to save Social Security.”
Source: “Economic Security” May 21, 1999

Cut taxes & interest rates to avoid Asian recession

    [To avoid the Pacific Rim currency crisis from affecting the US, Forbes has recommneded that the US:
  1. reduce the US tax burden to inoculate the US economy from the spreading financial contagion;
  2. reduce US interest rates to provide badly needed global liquidity;
  3. break open foreign markets now closed to US goods and services;
  4. advise other countries to follow basic principles of economic growth;
  5. and deny US taxpayer bailouts to the International Monetary Fund.
Source: “Economic Security” May 21, 1999

Fed’s deflation policy worsened Asian currency crisis

The Pacific Rim stock markets are in turmoil, in part because of an overly strong dollar. The Federal Reserve has been tightening since late 1996. Real short-term interest rates, normally 1% to 2%, are now around 4%. Many Asian countries have tied their currencies to the dollar. The Fed’s mild deflationary course-imperceptible, so far, at home-is having unmild repercussions on these smaller nations. [Pacific Rim] countries should refix their money to ours and tell Alan Greenspan to ease his squeeze.
Source: Fact and Comment FORBES Magazine Aug 25, 1997

Set money supply via gold prices to lower interest rates

The only reliable compass [for monetary policy] is one using the gold price. This does not mean you buy the yellow metal. All you do is look at the price. If it [goes up], you’re printing too much money. If [goes down], you’re being too tight. Is it a perfect compass? No. Is it better than the others? Yes. So I propose using gold as a compass. In this imperfect world, it is the most reliable one whether you’re doing it right or doing it wrong. And that way we will get lower interest rates.
Source: Speech at Harvard’s Kennedy School of Government Nov 27, 1995

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Steve Forbes
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