Fresh From Bush Business Bash,
Forbes Argues for Larger Rate Cut
Thursday, January 4, 2001
Wednesday's interest rate cuts were a welcome surprise to Steve Forbes, but the former presidential candidate — who was with President-elect Bush when the Fed made its dramatic announcement — says the move is still not big enough.
Fox News Channel's Jon Scott spoke to Forbes Thursday about what he believes is needed to assure a healthy economy in the long run.
Q: You were in the meeting with President-elect Bush yesterday when the word came of the rate cuts. Is that correct?
Forbes: That's right. We were having lunch and we got the word. People were surprised. But I was disappointed that (Fed Chairman Alan) Greenspan didn't cut rates in December. CEOs were saying that business is tough and it slowed down dramatically. Action was needed.
Q: What was the reaction to the word of the cuts?
Forbes: Very positive, and everyone knew that we had to do a lot more on the rate front as well as the tax and regulatory front.
Q: You've been a critic of Alan Greenspan and his actions. You welcome the actions but don't think it's enough.
Forbes: No. We need much more of a severe reduction in interest rates. Real interest rates are at a very, very high level and it's choking the economy. My only surprise is that it didn't choke sooner. You saw the turbulence in the markets last year. I think the markets were anticipating trouble. On the tax front, George W. Bush's tax-cut proposal is too big. But I think you'll see a tax cut because Congress is realizing how slow and troubled this economy really is.
Q: How long would it take for a tax cut to start percolating through the economy and stimulating business?
Forbes: If you get the Federal Reserve to continue dramatic cuts in interest rates, pump real credit into the economy and pass a significant tax cut, we could see the financial markets start to turn around in six months. Then Congress is going to have to do two other things. One is regulatory reform and then tort reform. Regulation is starting to strangle the economy as well.
Q: One of the remarkable things about the economic boom is that it comes without a great deal of inflation. There are critics out there that say if you cut taxes as much as George W. Bush wants to, you'll kick off inflation. What do you think?
Forbes: I think they're in fantasy land. They need to come back to earth and be realistic. The tax burden on the American people is too high. The reason we've had the boom in the last 20 years is because of the rate cuts in the 1980's. Some people in Washington are too slow to learn.
Q: So you would advocate tax cuts over and above the trillion and a half dollars that George W. Bush is asking for?
Forbes: Well, I think the tax cut proposal is good, reducing the income tax rates and the other changes proposed. I also hope that congress will also reduce the capital gains tax. You put that together and then I think we'll have a boost for the economy.
Q: A lot of people would have liked to be a fly on the wall in that meeting yesterday. You were there. Did you get a sense from the president-elect of what else he intends to do in terms of the economic policies?
Forbes: Well, he certainly made it clear that he wasn't going to back off on the tax policy and he touched on regulations from the EPA and energy problems elsewhere hurting this economy. It will have to be addressed and we have to get serious about taxes and regulation reform.
Q: What about oil prices? A lot of people point to the surge in oil prices as something that's really put the brakes on the economic boom. Did you get a sense of what he hopes to do about that?
Forbes: Yes. He made it very clear that we need an energy policy and that includes removing restrictions on getting more refineries and things like that. But we need more exploration to find the stuff and so I think he's going to push very seriously to remove the artificial restrictions in Alaska and elsewhere. He won't back off from that either.
Q: It's become clear that the budget surpluses we were expecting over the next decade or so will be bigger according to President Clinton. Does that make it easier to sell a tax cut to Congress?
Forbes: I don't know whether it will. As for the projections over the next decade, all they are just that — projections. If you don't make the changes in the economy now, those projected surpluses will disappear like water in the desert.
Q: We need them to provide the surpluses?
Forbes: You're exactly right. Without major tax reform and regulatory reform and the Fed moving, those surpluses won't be there. Reducing taxes is to ensure budget surpluses in the future.
foxnews.com |
