LAS VEGAS, Nev. -- For those who have started to accept the slow-growing US economy as the New Normal, media mogul and past Republican presidential nominee Steve Forbes delivered a blunt message at the annual Truckload Carriers Association Conference.
“This is the New Normal? No, it’s the new Abnormal,” Forbes told the well-attended conference.
Blaming the lackluster economic recovery on “bad policy decisions”, Forbes said the good news is that since the situation is government-caused it should not be hard to turn around. Of course, he had a recipe for the turnaround. It included four main points.
Monetary policy: Forbes said the federal government over the past decade (which includes the George Bush years) has placed too much of a priority on printing money and that has hurt the value of the US dollar and hurt economic growth because people are not sure what their assets are really worth.
“Imagine what life would be like if Washington did to the clock what it’s doing to the dollar with an hour constantly changing its value. You start tarnishing the value of money and you get less real growth. A weak dollar always means a slow recovery, “ Forbes, who is the chairman of Forbes Media, said.
Forbes’ solution: Go back to fixing the value of the dollar to the gold standard, as was done for 180 years until the practice was stopped in the 1970s.
“I predict within a few years it will be linked back to gold again,” he said.
He added that the US Federal Reserve’s policy of suppressing interest rates as a way of sparking economic growth after the recession is also backfiring, likening it to rent controls which he said actually reduce the number of apartments made available.
The only beneficiary of low interest rates, he claimed, was the federal government because its debt is less cumbersome when the interest it has to pay on it is low.
“It’s debt without tears,” he said.
Taxes: For all the talk that the US is in need of new taxes to solve its debt problems, the blunt truth according to Forbes is that the country is actually over taxed.
“Taxes are a burden. A tax on income is the price you pay for working. A tax on profits is the price you pay for being successful. All this talk about taxes is counterproductive. You want to get off peoples’ backs rather than burdening them with taxes,” he recommended.
When looking at European countries such as Greece, Spain and France, which have either fallen back into recession or are dangerously close to it, many economic analysts have blamed it on overly aggressive austerity strategies that chocked their economies before they had a chance to start growing again after the recession. Not so, according to Forbes. The real culprit has been the raising of taxes – Spain’s top tax rate is now 52%.
“Is it any wonder the economies of the world aren’t doing well?” he asked.
He added there seems to be a movement at the state level to reduce the tax burden, which he hopes will work its way up to the federal level.
“States without state income taxes over time do better than states with income taxes,” he assured.
He also took issue with how complicated the American tax code has become – it’s over 9 million words.
“It’s insane. Comedians couldn’t come up with this stuff…When you look at an abomination like that, it is beyond repair. The only thing you can do is to drive a stake through it and hope it never rises again,” he said to loud applause.
He wants the current tax system replaced with a flat tax. Make a full hearted attempt at simplifying the the tax code and the economy will “take off like a rocket”, according to Forbes.
3. Spending: Washington’s spending is taking money away from the people who really grow the economy, according to Forbes.
“Government spending is not manna from heaven. It’s taken from you and that depresses the economy,” he said.
He was also critical of government regulation, arguing that regulations now cost $1.75 trillion per year for US businesses to comply with.
Healthcare: The final piece of the puzzle, Forbes said he didn’t understand why the growing demand for healthcare as the US population ages should be considered a crisis. After all under normal business conditions, growing demand for a service is considered a good thing.
“The answer is we don’t have real free markets in health care. If you go to a doctor and ask what it costs for a particularly operation, you get a strange look. Why would you want to know? Can you imagine doing business without knowing what the prices were? It’s a crazy system. No wonder it doesn’t work,” Forbes said.
He advocated letting the free market prevail in providing healthcare services because the more competition there is the more pricing will be reduced while service will be improved. He cited the example of lasek eye surgery which has made advances over the past decade yet has also come down in price.
Forbes capped his speech to the TCA with a tough but positive message. He believes the seeds of America’s resurgence are already sprouting and challenged people to lead.
“This stagnation won’t last. Where do you want to be five years from now? Cut through the turbulence. Leadership is about making things happen,” he said.