Steve Forbes

ROBIN MACNEIL: Mr. Forbes, thank you for coming this evening.

STEVE FORBES, Republican Presidential Candidate: Nice to be with you.

ROBIN MACNEIL: Do you really want to get into a game in which the voters are as cynical and as apathetic?

STEVE FORBES: Well, I think it reflects where America is today after eighty years of warfare, two world wars, forty-year Cold War. People recognize that the old political patterns must change if we're going to move ahead. This country has enormous opportunities, very real obstacles, and most of the candidates are not giving the impression they know how to make the country move again, where we are historically, and what we must do to move ahead. I think that we can move ahead. I think that we're on the verge of an extraordinary era of economic expansion and improving the quality of life. We must make some changes and reforms. If we don't make those changes and reforms, then bad things will happen in this country, because the frustration is very real, but the opportunity is there as well.

ROBIN MACNEIL: When you announced your candidacy, you said someone is needed to unlock the stranglehold the political class has on American life. How do you unlock the stranglehold, and why are you the somebody to do that?

STEVE FORBES: Well, it has to be somebody who's not part of the system who recognizes what the shortcomings are. But I think in terms of unlocking the stranglehold, I think what we are on the verge of is an era where we will genuinely return or move ahead with traditional American strengths, and that is when they talk about reducing government. What I think is really meant is we're going to return opportunity and responsibility to individuals, starting with the tax code, which is a dead weight on the economy, corrupt--legalized corruption. People realize that it's un-American, it is the source of major political pollution, so scrap it, put in a flat tax. A family of four would pay no tax on the first $36,000 of income, only 17 percent above that. That would not only cleanse the politics of this country or go a major step towards that, it would get the economy moving. Better jobs, better paying jobs, that is important, lowering interest rates, returning in education, the schools to the parents, whether through choice, vouchers, charter schools, whatever. There are many things that can be done. I think they will be done, and when that happens, as people get more power back, whether it's Social Security, whether it's medical savings accounts, so that it belongs to you not your employer or the government, then extraordinary things will happen. There's a latent strength in this country. Fundamentals are strong. We just have to remove those shackles, and then I think we're going to surprise ourselves and the world with what we're going to achieve.

ROBIN MACNEIL: Listening to that optimistic message, I'm reminded that it's widely thought that if Jack Kemp had chosen to run this year, you would not have. Is that true?

STEVE FORBES: That's true. I tried to get, along with many others, Jack Kemp in the race earlier this year, and when he didn't run, it became very apparent that there was a void and a vacuum on how to get America moving again. But the fundamentals are there for it to happen; we just have to recognize what the obstacles are.

ROBIN MACNEIL: So does that make you, Mr. Forbes, a real candidate, or a messenger willing to spend, I've read, up to $25 million of his own money to get his message heard?

STEVE FORBES: You don't go into the maelstrom of presidential politics unless you are absolutely serious with the voice and the vision to go all the way to make those changes happen, so I'm in to go all the way because that's the only way these reforms will happen. The political class may talk about them from time to time, but they're not going to see them through.

ROBIN MACNEIL: I was reading in the "Economist" Magazine, which suggests your real purpose is to get either the Republican front-runner or failing that, even President Clinton, to adopt the flat tax idea, you would consider that success, is that right?

STEVE FORBES: Partial success. The flat tax is simply a means to an end to enable people to keep more of what they earn, remove barriers to investment, so the economy can grow. It's the first and essential step, but there are other steps that have to be taken, including getting interest rates down, education, even in the inner cities. Why shouldn't, for example, public housing be run by the tenants? If we talk about personal responsibility, give people that responsibility, and I think they'll do a better job than the bureaucracies, and you'll see leadership from inner city parents, from people that you never expect, they're going to rise to the occasion. They just have to be given the opportunity.

ROBIN MACNEIL: You want to return the dollar to the gold standard, or a standard like gold, from which President Nixon removed it in 1970 or '71. How would that bring down interest rates?

STEVE FORBES: Essentially, it would take the value of a dollar outside of the hands of the politicians. If you put something--the dollar should be a fixed measure, just like a ruler, a foot is 12 inches, it doesn't fluctuate each day, an hour has 60 minutes, that doesn't fluctuate each day. The dollar should be a fixed measure. When it's not a fixed measure, when the value can change each day, then interest rates go up because people don't know what it's going to be worth tomorrow. Before the mid 1960's--

ROBIN MACNEIL: And can speculate on it.

STEVE FORBES: And can speculate on it. Before the mid 1960's, an average American family could get a 30-year, fixed rate mortgage at 4 1/2 percent. I think we can return to that, and if you tomorrow morning woke up with a 4 1/2 percent, 30 year-fixed rate mortgage, and a flat tax for a family of four would have no tax on $36,000, only 17 percent above that, no tax on personal savings, I think you'd begin to see a dramatic change in the quality of life in this country, we could move ahead both materially and in quality of life as well. Both are means to an end, giving opportunity and responsibility to individuals. That's been our great strength in the past, and I think it will be in the future.

ROBIN MACNEIL: You're--you--the flat tax that you sketched in a moment ago is roughly that put forward by Dick Armey, the Majority Leader in the House. Opponents of that like Robert McIntyre of the Citizens for Tax Justice, say that it would cost the Treasury $200 billion a year, it would just increase the deficit.

STEVE FORBES: It would actually do the opposite. His arithmetic is faulty, and Dick Armey I think has sometimes gone hoarse trying to show 'em where the arithmetic is wrong. On a theoretical basis if you assume no good would come of it, there would be in the first year a $40 billion shortfall. I'm convinced that with better compliance and with the growth, that would quickly be wiped out. And I also take the tact that even if it causes Washington some discomfort, if it's good for the country, then Washington should cut itself to fit the needs of the country, rather than the other way around.

ROBIN MACNEIL: The effect some predict would be like a re-run of the Reagan years, when the deficit soared, the national debt quadrupled, America became the world's largest debtor nation, American taxpayers now have to pay almost as much in debt service as they do on the defense budget each year. Why would it not be a replay of those years on the negative aspects of it? I know you say on the positive aspects it would mean a lot of growth.

STEVE FORBES: Well, most important, you have a very different Congress and a very different set of public opinion than you did in the 1980s when we were still in the midst of the Cold War. You wouldn't have the kind of spending increases you had in the 80's. In the 80's, we created 20 million new jobs, including a record number of high-paid jobs, more than Japan and Europe put together, several times over, four to five times what they did put together. It was a decade in which government revenues went up. The personal income tax receipts of the federal government went up over $200 billion a year by the end of the decade. So a little bit of spending restraint, economic growth, an honest dollar, which would enable families to get houses again and not feel they're on a treadmill and the treadmill is winning, and other reforms such as education, I think this country is ready to take off.

ROBIN MACNEIL: Government revenue may have gone up, as I said, the--the country ended up with a national debt four times the size it had been when Reagan took office in 1980.

STEVE FORBES: It was two and a half, but the point was we were first fighting the Cold War--

ROBIN MACNEIL: One trillion to four trillion--

STEVE FORBES: Two and a half, two point six at the end of the decade, but the point is that we're fighting a Cold War--

ROBIN MACNEIL: I'm including the Bush years, excuse me.

STEVE FORBES: Okay.

ROBIN MACNEIL: Which took it up--at least according--yes, took it up to 4 trillion.

STEVE FORBES: But in the 80's, we're still fighting the Cold War. We had to make up for the lack of defense expenditures in the 70's, and also Congress didn't say no or didn't try to restructure or reorganize the government. We have a very different situation today. If we have a little bit of spending restraint by Congress, if you increase those kind of government revenues, that substantially reduces the deficit. If you have interest rates like you did before the mid 1960's and the previous hundred years in our nation's history, that alone would reduce the deficit by $100 billion. In short, I think this country, the dynamism that we create in the economy would make it possible to have an environment where we could make substantial changes in government, and enable the country to move ahead.

ROBIN MACNEIL: The government now spends--the federal government spends about $1 1/2 trillion a year, or $1500 billion a year. How much of that do you think should be shifted out of Washington, back into private pockets, where they can reap the miracles you think it would?

STEVE FORBES: Well--

ROBIN MACNEIL: What proportion of that $1 1/2 billion [trillion]?

STEVE FORBES: The nice thing is if you have a vibrant, growing economy, the whole pie expands. The government may not even have to reduce its actual spending, but as a proportion in importance in our lives, it would shrink. And there are other reforms too. For example, medical savings accounts, where you would own your own health plan, you would be able to direct those dollars, instead of a bureaucracy, or an employer. We tried it at Forbes four years ago. Our costs are lower today, without taking away people's benefits. Everyone's come out ahead. The nation should do it, and Social Security, why shouldn't those younger workers, who know that the system is busted, there will be nothing there for them when they retire, in effect, have their own savings account, or part of that payroll tax, and they'll be making this proposed reform within the next ninety days, part of the payroll tax go specifically to their own savings account, so that the politicians, Washington can't lay their hands on it, it's their savings account, their money, it'll be there when they retire, they will direct how it's invested, that is again putting it back to you. And Washington, it's not cutting back or slash and burn, it's that they're doing a lot of things, and I think we're going to rediscover we can do better ourselves.

ROBIN MACNEIL: Speaking of what some people would regard as slash and burn, the current Republican drive to cut back many programs, I notice you said that you rejected the notion that the wagon is crowded and it's time to start throwing people off. Does that mean that you oppose some of the cuts that are being made in federal programs?

STEVE FORBES: Well, I think you talk about wagons, I think the great genius of the American people is that we invent tractors to pull wagons, instead of trying to get people to pull wagons. I think that metaphor speaks a lot about some of my opponents.

ROBIN MACNEIL: Phil Gramm's metaphor, it was.

STEVE FORBES: It's a very grim outlook, but I think we can make some real changes on programs, including welfare, which destroys people, destroys the very people it's supposed to save. I think we can make real changes on Medicare, particularly with medical savings accounts, when we get off this treadmill of raising taxes and cutting back benefits. That's what they're trying to do on Social Security, trying to do on Medicare. You make these fundamental changes, then we get the--begin to get good worlds again where you have more control, you will direct those dollars better than a bureaucracy will, it won't crush innovation, which is what I fear we're headed for in medicine in this country with HMO's and more and more government involvement. We can avoid those. We have an extraordinary genius. I think the genius of this country is not that we don't make mistakes--we're human and we've made some very serious mistakes. We've had very serious racial problems, very serious mistakes, but the genius of this country is not that we're not human, but that when we do make mistakes, we do stumble and fall, we can pick ourselves up, not only pick ourselves up but reach new highs as well. We've had periods before, troubled periods in our history, and we've rebounded and reached new highs--I think about to do it again.

ROBIN MACNEIL: Well, Mr. Forbes, thank you very much for joining us.

STEVE FORBES: Thank you.