Authors: Addison Wiggin,Kate Incontrera,Dorianne Perrucci
Tags: #Forecasting, #Finance, #Public Finance, #Economic forecasting - United States, #General, #United States, #Personal Finance, #Economic Conditions, #Economic forecasting, #Finance - United States - History, #Debt, #Debt - United States - History, #Business & Economics, #History
Q:
Is it important for the American people to recognize what this
debt means to our economy in the future?
Steve Forbes:
What ’ s important for the American people to realize is that the government has, with a sleight of hand, given us a lot of obligations that we don ’ t know we have. We know about the national debt — that ’ s a number. We know we have obligations on Social Security and in health care that are fi ve, seven, eight times what the national debt is, and there ’ s no way the current system can deal with it. It ’ s like you think you have a house, you may have bought a house, say, for $ 200,000. What they didn ’ t tell you is that you ’ ve got a million - dollar mortgage on that thing. That ’ s what the crisis is. So when people realize we ’ ve got a crisis, there are positive ways to deal with it and turn the tables on the big spenders and the politicians. That ’ s what we ’ ve got to do.
Q:
Do you sometimes feel like you ’ re a contrarian going against
the public? Do you feel that the public debate is starting to line
up with you?
Steve Forbes:
My role now is agitator, stirring the pot, trying to make things happen, and there are going to be times when you go against the grain. Ronald Reagan could not get elected president in 1968 when he fi rst ran, could not get elected in 1976, but he stuck to it, and in 1980, with the same basic principles, he got in and achieved great things. So rather than see yourself as a c18.indd 259
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260 The
Interviews
contrarian or whatever you want to call yourself, people should see themselves as seekers of the truth or as people who are trying to do things based on basic principles. And sometimes you may fi nd a hostile environment and sometimes you may fi nd you ’ ve got a lot of missionary work to do, but you have to do it. That ’ s what America ’ s all about.
Q:
As a proponent of the American people getting the truth, if
you could pick one truth that they should learn about money,
monetary policy, debt, gold, what would it be?
Steve Forbes:
I would want people to realize that the money that the politicians spend is your money. It comes out of your pocket one way or the other. They take your money and they pay the tab and you ’ re supposed to be grateful. Don ’ t get caught up in the exact number; just remember it ’ s your money. When politicians spend, they get it from you. And if they say they ’ re going to give you a free lunch, just remember, they ’ re using your credit card, your money. You ’ re eventually going to be getting the bill.
Q:
And once the American people have that knowledge and it has
become second nature to them, if you will, what would be the
right action for them to take?
Steve Forbes:
The American people, as a start, should say, “ Who are my representatives? Who is my state representative, state senator, congressperson, U.S. senator, governor? What are they doing and why are they doing it? ” Challenge leaders in primaries, even if they ’ re not doing the job right. Go online, write a letter to the editor, be active. It only takes a few minutes each month. By golly, that ’ s how you get results.
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Additional Resources
There are many great resources on the Web if you ’ re interested in learning more about the nation ’ s economy and securing your family ’ s place within it. Here are a few suggestions for where to begin
• Peter G. Peterson Foundation: www.pgpf.org
• Agora Financial, LLC: www.agorafi nancial.com
• The Concord Coalition: www.concordcoalition.org
• The CATO Institute: www.cato.org
• The Brookings Institution: www.brookings.edu
• American Enterprise Institute: www.aei.org
• Center on Budget and Policy Priorities: www.cbpp.org
• Center for Retirement Research: http://crr.bc.edu
• Choose to Save: www.choosetosave.org
• Feed the Pig: www.feedthepig.org
• Citizens Against Government Waste: www.cagw.org
• The Committee for Economic Development: www.ced.org
• US Budget Watch: www.usbudgetwatch.org
• Common Good: www.commongood.org
• The Heritage Foundation: www.heritage.org
• OMB Watch: www.ombwatch.org
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262
Additional
Resources
• One Horizon Foundation: www.onehorizon.org
• Peterson Institute for International Economics: www.iie.com
• Progressive Policy Institute: www.ppionline.org
• Public Agenda: www.publicagenda.org
• The Tax Policy Center: www.taxpolicycenter.org
• The Urban Institute: www.urban.org
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Index
American dream, 118–119
economy, U.S. economy (relationship),
loss, 154–155
201–203
American economy, defi nition/role, 137–138
global growth contribution, 64–66
Areddy, James, 197
government, size, 199–200
Austrian school of thought, 147–148
government bonds, dumping (impact),
187–188
Baby boomers, 30–31
importance, 203–204
Bixby, Bob (federal debt issue), 25–28
nuclear option, 72
Black Monday (1987), 54–57, 169
U.S. debt consumption, impact, 189–190
Bond market, Buffett usage, 186–187
U.S. exports, 68
Bonner, Bill, 43–44, 90, 111
U.S. treasuries, liquidation (threat), 70–71
Borrowing, problems, 149–150
“Citizens Guide to the Financial Condition of Bread and circuses, Roman control
the United States” (Peter G. Peterson
system, 116–117
Foundation), 86–89
Bretton Woods, 161–163
Clinton, Bill
breakdown, 147
budget reform, 102
lessons, 120–123
campaign promises, 101
Brookings Institution, 20–21
Concerned Youth of America (CYA), 34–36
Budget
Concord Coalition, 20–21, 35, 69, 139
balancing, diffi culty, 130
impact, 23–24
illustration, 29f
Volcker contribution, 166–167
problems, 84–85
Congressional Budget Offi ce (CBO), 32
stresses, 27–28
Conrad, Kent, 27–28
usage, reason, 148–149
Consumption, focus, 67
Budget defi cit, 23, 174
Contract with America, 38
defi nition, 32–33
Credit, addiction, 53
money, borrowing, 69
Current account defi cit, 59–60
solutions, 41–42
Budget Reform Act of 1974, 32
Debt
Buffett, Warren (Oracle of Omaha),
ceiling, increase, 16
60–64, 90, 175
collective madness, 114–115
business approach/philosophy, 183–185
foreign ownership, impact, 135–136
economics, fascination, 176
generational passage, 155–156
money/family/society, philosophy, 192
payments, determination, 113–114
Bush, George (41), budgetary involvement,
service, Forbes perspective, 252
208–209
threat, Forbes perspective, 250–251, 259
Bush, George (43), Laffer perspective, 234–235
Debt-to-GDP projection, 85f
Defi cit
Central bank, impact, 172–173
impact, Laffer perspective, 234
China
importance, 32–33, 128–129
change, 198–199
increase, 16, 150, 235–236
economic boom, 66–67, 181, 244
issues, 85–88
263
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264 Index
Defi cit (
Continued
)
Fiscal imbalances, problems, 136–137
nonimpact, Cheney interpretation, 80
Fiscal path, unsustainability, 22
projections, 30f
Fiscal policy, politics (diffi culty), 38–39
reduction, 180–181
Fiscal problems, 18–20
Rivlin explanation, 107
Fiscal Responsibility Act, 38
Ronald Reagan philosophy, impact, 80, 218
Fiscal Wake-Up Tour, 20–21, 27, 36, 82
spending, expectations, 129–130
Ames arrival, 40–41
worries, 33
media exclusion, 37
Delusions, 111–112
Flat tax, Forbes concept, 256–257
Demagoguery, increase, 184
Forbes, Steve, 245
Derivative contracts, nominal/face value,
Ford, Gerald (budgetary involvement), 207–208
122–123
Foreign currencies, Buffett purchase, 178–179
Freedom, delusion, 119
Economic Growth and Tax Relief Reconciliation Free market theory, 69–70
Act of 2001, 77
Economic issues, understanding, 61–62, 99–100
Gold
Buffett contention, 115–116
Greenspan support, 124
importance, 167–168, 175–176, 220–221
standard
reasons, 108
Buffett perspective, 179
Economics
Forbes perspective, 259
dismal science, 134–135
Gold standard, fi at currency (contrast), 123–124
Volcker interest, 161–162
Gold window, Nixon closure, 121
Economy, threats, 27–28
Government level, determination, 78–82
Employment rates, decrease, 77
Government spending/taxes, contrast, 168
Entitlements
Great Depression, impact, 246–247
habit, 145
Greenspan, Alan, 38, 52, 90, 169
programs
Forbes perspective, 253
problems, 255–256
Jon Stewart interview, 56–57
support, 105
Paul O’Neill relationship, 222–224
reform, 140–141
Ron Paul, relationship, 53–54, 152–153
Greenspeak, 55
Federal budget, defi cit level, 105–106
Gross domestic product (GDP), 19
Federal debt, 180
decrease, 60
history, 25–26
imports, relationship, 181–182
level, 83f, 86
personal savings, equivalence, 44
public debt, Roosevelt administration
taxes, percentage, 79
concept, 159
Federal fi nancial problem, worsening, 37–38
Hard money, 124
Federal government, size increase (Laffer
Heritage Foundation, 20–21, 38
impact), 232–234
Home prices
Federal government, spending, 87
decline, 45–46
fi nancing, 105–106
S&P Case-Shiller indexes, 46f
Federal Reserve, 46–48, 54–57
Housing bubble, savings (impact), 159–160
Federal Reserve Act, 46–47
Human nature, Forbes perspective, 257–258
importance, 125–126
Federal surplus, 104
Infl ation, 48–51
Fed window, closing, 49
appearance, 143
Fiat money, 46–47
consequence, 52–53
Finances, management (problems), 17–18
expectations, 50
Financial warfare, 72–73
explanation, 151
Financing gap, closing, 84
factors, 143–144, 171
Fiscal defi cit, worsening, 131–132
Federal Reserve, impact, 142–143
Fiscal discipline, reestablishment, 133–134
immorality, 151–152
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Index
265
occurrence, 144
administration economic rating, 141–142
spending, impact, 254–255
family life, 144
Interest rates, impact, 164
Political system, problems, 82–85, 237–238
International monetary system, attention, 122
Private debt (public debt), foreign ownership, 70f, 71f
Just-in-time politics, 135–136
Productive capacity, loss, 182–183
Purchasing power, 63
Laffer, Arthur, 225
crisis, inheritance, 229–233
Reaganomics, 25–26
economics, interest, 225
Recession, 103–104
Laffer curve (taxable income elasticity), 25–26, Reserve currency, status (threat), 131
76–77
Rivlin, Alice, 32–33, 89–90, 99
Leadership
CBO directorship, 100
defi cit, 75, 84–85
OMB deputy directorship, 100–101
Forbes perspective, 248–249, 257–258
Roberts, Paul Craig, 71–72
role, 185–186
Rubin, Robert, 38, 70, 91, 127
Longevity, increases, 33
Long-term fi scal defi cits, addressing, 132–133
Savings
absence, reasons, 170–171
Medicaid, problems, 255–256
culture, change, 249–250
Medical care spending, increase, 33
defi cit, 43
Medicare
importance, 172
costs, 84
monetary policy, disincentive, 158–159
initiation, 81
problems, 84–85, 169–170
problems, 79
support, 156
Middle-class tax cut, argument, 128
Savings rate
Mills, Wilbur, 141
low level, 55–56
Money, understanding, 260
negative level, 52–53
Money/capital assets, strategic tool, 191–192
reduction, 53
Money supply, 48–51
Shanghai Bureau, importance, 197–198
decline, 49
Silver tsunami, 28–31
Mr. Rushmore crowd, 89–91
Social Security
Mussolini, debt control, 117–118
problems, 79–80, 255–256
program, payouts, 29
National debt, Forbes perspective, 246
surpluses, problems, 139–140
National debt clock, 39–40, 234
Society benefi ts, distribution (disparities), National savings, defi cits (impact), 87
193–194
Nixon, Richard M.
Spending
dollar devaluation, 229–231
expansion, problems, 157–158, 174
impact, 120–123
reduction, 248–249
Squanderbonds/Squanderbucks, 61, 69
Oil embargo (1973), 142
Squanderville, Thriftville (contrast), 60–64