CEO Insider: Steve Forbes on Tax Cuts, Mid-terms and Economy

Congress is back in session and with the Mid-terms less than two months away we are going to be in for a very colorful "news cycle" as we journalists like to call it.


I love politics. And since the fall of Bear Stearns and Lehman, the relationship between government and business has never been so intertwined. In fact for better or worse, they are double or triple knotted.

The election is all about "the economy" again and many Americans are not happy with the state of our nation. The jobs picture and slow recovery have many voters upset and worried about their future.

Businesses are on the sidelines when it comes to hiring because of the uncertainty being created by government policy. Its a mess. I decided to dish politics with Steve Forbes, former Presidential Candidate and CEO of Forbes.

To kick off the political flavor of the week, we dove right into the battle over the Bush Tax Cuts.

SF: I think what John Boehner did Sunday when he fell into the President's trap on the taxes, helped galvanized the Republican base even more to fight for total extension, I think a number of Democrats are also climbing on board.

I also think Sen. McConnell coming out for a full extension bodes well for getting them done.

The President is going to fiercely resist it. He believes from his inner core that people with above a certain income have more than they should have and that many probably have gotten it from ill-gotten ways. I think the Republicans will force a showdown on it.

LL: Do you think is there any room for compromise on either side?

SF: No because congressmen like Paul Ryan and others understand the point that the tax cuts is not just about putting money in people's pockets. Its about incentives and about the price of risk taking which is a price on small businesses.

As you know, half of small business income would fall under the tax increase that the President wants. So the Republicans will fight the Democrats on this.

There are a number of Democrats who are coming up for re-election in 2012 and 2013 and if push comes to shove, they will go on the side of the GOP rather than with the President. The President would then have the bill on his desk and if he vetoes it then everyone will know that he vetoed it not Congress.

LL: There is so much uncertainty in regards to the economy and job generation. What are you hearing from your CEO friends on this?

SF: Uncertainty is a killer on taking risk and action. If you don't know what the rules of the game are you are less likely to play the game. We are all familiar with the uncertainty coming out of this monstrous health care bill. The 1099 provision has become what I like to call as "the poster boy" on the excesses and obtrusiveness this new piece of legislation brings to the economy.

But there is one thing that gets under appreciated in all of this and that's our monetary policy. The weak dollar is playing havoc. It encourages volatility, currency speculation,commodity speculation.

People make money from trading profits rather than from investing. It also inhibits long-term investing depending on the current value of the currency. So with all this uncertainty on the dollar, on taxes, and on regulation its amazing the economy is doing as well as it is.

LL: What do you think about the new stimulus plan the President has unveiled?

SF: Stimulus plans over all don't work because you have to get the money from somewhere.The money doesn't come from a rocket ship from Venus or from Heaven. You get it from borrowing, taxing or printing money — which is another form of taxation. So its taking the money out of the economy and pumping it back in. That's not real stimulus.

LL: What would you suggest Congress do?

SF: First thing the government must do and it starts with Mr. Bernanke — they have to stop trashing the dollar. Don't increase taxes.

At the very least extend the Bush Tax cuts and then take a very serious look at the regulations coming out of Obama-care and the financial reform bill. A stable dollar and no tax increases would do a lot for the economy.

LL: How would you characterize the economy? I asked Wilbur Ross that question last week and he told me its more punctuation than a letter of the alphabet. How do you feel?

SF: The economy is growing but at a very sub par, low-gear kind of growth. Normally after a severe fall you always get at least over the short-term a snappy, snap back and that didn't happen this time.

LL: When do you think it will snap back?

SF: We'll get this low-gear economy going into next year, and I think you are going to see a real donnybrook in Washington of setting the stage for 2012, and starting to repeal the worst aspects of Obama-care.

While I think there will be turbulence over the next couple of years, I think we are going to set the foundations for some real growth after 2013.

LL: When you look at the long list of GOP Presidential prospects, who would you like to see as the front runner for the 2012 Presidential election? Do you think the President's charisma will help him this time around?

SF: It doesn't matter about the President's charisma.

If you are pursuing the wrong policies charisma will only make people realize there's a difference between talk and the actual actions. His charisma may actually go against him. When you look at the field of GOP hopefuls, I'm looking at people like Governor Mitch Daniels out of Indiana and others who have demonstrated real performance doing an executive job.