'The Last Gasp of the Dinosaurs'

Publisher and flat-tax Republican Steve Forbes on 1930s-style economic policies, the news industry, and the future of the GOP

In the April 1996 edition of reason, then-Editor Virginia Postrel wrote a column arguing that “Steve Forbes is a serious candidate” for president. “Not because he’s a rousing speaker,” Postrel observed, “but because he believes in the open-ended future, in the creativity of free people, and in the importance of clear, simple, limited rules within which individuals can shape their own decisions.”

Of those “clear, simple, limited rules,” the most famous  was a flat and reduced personal and corporate income tax, an idea that, while never coming close to adoption at the federal level, nonetheless propelled a long-shot magazine publisher with no political experience into a third-place finish in the Republican primaries, including wins in Arizona and Delaware. In 2000 a flat tax song and social conservative dance helped Forbes whisk into second-place at the Iowa caucus, but he quickly dropped out after finishing third in New Hampshire and Delaware. In 2008 Forbes was a strong backer of the doomed Rudolph Giuliani.

Malcolm Stevenson Forbes Jr., 62, is the third Forbes to publish the successful business title of the same name. Founded in 1917, Forbes has gleefully billed itself as the “Capitalist Tool,” lionizing the entrepreneurs who make the world a richer place. In addition to producing its signature lists of the country’s (and globe’s) richest capitalists and companies, the 900,000-circulation magazine has been a staunch opponent of antitrust enforcement, an aggressive supporter of anti-totalitarian movements abroad, and a stubborn purveyor of a sunny, market-based optimism. Last November, at the height of political panic over the financial crisis, Forbes put Forbes himself on the cover, explaining “How Capitalism Will Save Us.”

In July, Editor in Chief Matt Welch interviewed Steve Forbes at the annual FreedomFest conference in Las Vegas.

reason: People know you as Steve Forbes, flat taxer and presidential candidate, but you’re also publisher of Forbes magazine in an era when magazines are struggling. How is Forbes responding to the economic crisis, the publishing crisis, and the transformation of the print industry?

Steve Forbes: When you have a severe recession and you have something transformational as we now see un-folding with the Web, you have to do two things. One, you have to address the immediate circumstances, which means belt tightening, which we did—and we did after 2001, when the economy also went temporarily off of the cliff. But at the same time, you have to invest for the future. And thankfully, 12 years ago, when we went online as did everyone else, we did not make the mistake that many print publishers made, and that was to think you take the printed page, throw it online, and have your electronic publishing. When Thomas Edison invented movies, some people thought you’d film a stage play and that was a feature film. No. It’s an entirely different medium.

We’ve always focused on entrepreneurs, on investors—on capitalist people who want to get ahead, people who want to do things in business. So we saw the website as another platform to reach the same constituency. Our value added is information, insights, and analyses, plus our profound belief in the moral basis of capitalism, which is meeting the needs and wants of other people. If you have that, you don’t get hung up on what the particular platform is.

reason: David Carr had a piece about you guys in The New York Times—a little snarky, but it was interesting. One thing he posited is that in 2009 this whole “Capitalist Tool” stuff is out of fashion; it’s out of step with the times. What’s your broad response to the notion that your stance or ethos is out of step and anachronistic?

Forbes: Well, capitalism—entrepreneurial capitalism, democratic capitalism—always goes through phases where it’s, quote, “out of fashion.” And it’s usually because of catastrophic mistakes made by government. The victim is blamed for it. 

But you don’t abandon your mission or your core values because a crisis has put capitalism under a cloud. We went through it in the ’30s, we went through it in the ’70s, the greedy decade of the ’80s. These things do happen. But I think what’s happening in Wash-ington is the last gasp of the dinosaurs of the 1930s. It’s Jurassic Park statism. Oh! Franklin Roosevelt again! Wow! But it’s not working. It didn’t work in the ’30s.

So here we are today, and what’s the response? More spending, more taxes, and the economy is not responding the way it should. But while we’re getting assaulted now, it’s also a chance to regroup and hit these people back, because they are going against human nature, they are going against the impulses that come out of true entrepreneurial capitalism. While they seem to have the commanding heights at the moment, it’s only temporary.

reason: Do you see, to borrow a phrase, some green shoots, not necessarily in the economy, but in the citizen response to Washington economics right now? 

Forbes: You see it with the tea parties, and you saw it in the state of Illinois, where the governor proposed tax increases, but the Democratic legislature ended up defeating them. The most amazing thing is now unfolding in California, where they’re seriously considering a flat tax because they’re beginning to realize—the Democrats!—that a highly progressive system doesn’t produce the revenue they need for their progressive programs.

reason: Have you seen an uptick in interest in the flat tax idea? Have people been knocking on your door and saying, “Oh yeah, about that thing.…”

Forbes: It’s not so much knocking on the door as people asking, when you face a severe crisis, what do you do? That’s one contrast between the political world and the commercial world. In the commercial world, failure happens all the time. It’s part and parcel of the system. You try something; it works or doesn’t work. In politics, you often have to go to the cliff before something is done. California’s at the edge of a cliff. They can’t print money. IOUs are not quite the same as legal tender. And so that’s why they’re considering something like the flat tax. Both [Gov. Arnold] Schwarzenegger and now Democrats in the legislature are starting to brood about the idea in sort of sheer desperation. It’s a version of what Ronald Reagan said: You don’t change minds on Capitol Hill through sweet reason; you do it through the heat of public opinion.

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  • John Tagliaferro||

    Can you get him to do something about that lisp?

  • MP||

    My economic principles line up pretty closely with Steve Forbes. Too bad he's a warmonger.

  • ||

    If someone has a tropism to economic freedom you actually can often convince them not to be a militarily adventurist, using the same sorts of arguments they use for free markets.

  • Kroneborge||

    My views on liberty often align with the libertarians, to bad they are a bunch of peaceniks, lol

  • ||

    I'm a hawk at heart but here's the problem.

    Wars cost money and lives. Someone has to pay. It's just as problematic to confiscate money (and lives) from others for a war as it is to do so for any other reason.

  • ||

    Yay capitalism!

    Oh and, uh, fuck the GOP. They are just going to get more and more neo-conservative, pushing away the moderates and not getting as many votes, because neo-con ideals are insane and immoral. But, to be fair, fuck the Democrats too. We need a libertarian president, but unfortunately the GOP will just look at whoever the candidate is and call him crazy, even if he is more intelligent than every other candidate.

  • ||

    WhAT!?! According to Glenn Beck and Hannity, Ayn Rand was a Republican. How DARE you say otherwise!

  • ||

    Oh shit! I went against Sean Hannity? Guess that makes me a terrorist!

  • ||

    "Matt Welch Interviews Steve Forbes"

    Does this mean that Pat Paulsen is dead? Bummer.

  • ||

    Forbes was *for* the bank bailouts, and you didn't ask him about it? That's a real missed opportunity.

  • Matt Welch||

    I agree.

  • ||

    I'm sorry, but Forbes backing Giuliani sticks in my craw. Forbes makes economic sense, except that funding shitloads of war and law enforcement sort of screws that up.

  • ||

    Agreed. Someone I know met Giuliani, said he was a complete asshole. It was his fundraiser, and I'm pretty sure he got close to no money.

  • ||

    I used to watch Giuliani on NY1 doing his mayoral press conferences, just to see him eat reporters alive. By being a huge asshole. Entertaining, in a NYC sort of way.

  • Another Phil||

    NYC ferret ban. Enough said.

  • ||

    Re:John Galt

    Agreed. Someone I know met Giuliani, said he was a complete asshole.

    I did not need to have a friend tell me that - the guy IS an asshole. Any ex-US Attorney that made his career by railroading rich people (whose only crimes were making "too much money", legally) IS an asshole in my book.

  • ||

    Haha true. But yeah, he was having a fundraiser and next to no one would donate because he was such an ass.

  • ||

    Forbes is a crony capitalist bung hole. The flat tax is total fraud. He tried to sell it as tax simplification but there's nothing complicated about a progressive tax rate. All the gajjillion pages of tax code are about figuring how much income to tax you on. His plan did nothing to change that.

    And in the last financial meltdown he came out in favor of saving the too big to fail institutions and repealing mark to market. Steve thinks that letting banks value their assets at whatever they want them to be worth fixes everything.

  • ||

    Compared to the likes of Obama and Bush, Forbes is a regular free market paragon.

    And a flat tax is absolutely and always preferable to a progressive tax.

    But yeah him being pro bailout was telling. I wonder if he would be now he's had time to think about it.

  • monolith||

    It's pretty childish of me but i always think of just how much money he inherited.

    How does he get away with not being questioned about his support for massive bank bailouts? How is that capitalism?

  • ||

    I voted for Forbes in one those primary thingees. He's flawed in any number of ways, but he's not an economic retard like the last few presidents.

  • ||

    The economic advantage of the flat tax is that high marginal tax rates leave people with incentives to work less and to work around the tax law. The political advantage is that you don't have people thinking they're getting programs for free because the new taxes will only be on "the richest 1%". The problem is that lower income people genuinely have more to lose from taxes, because they have a harder time saving and meeting their basic needs at the same time. That means that taxes on poor people make them more dependent on the government in the long run.

    That said, the highest marginal tax now is on welfare recipients; getting a job often cuts benefits by as much or more as the salary, meaning that the marginal tax rate is over 100%

  • ||

    IMO, a flat tax is only preferable to a progressive tax or any other tax it replaces if it lowers the amount of revenue the govt receives. Forbes pitches the flat tax in part by saying that it benefits the govt by effectively raising _more_ taxes. His statist slip is showing.

    I'd love to see a Ron Paul style flat income tax, i.e. at the 0% rate.

  • ||

    I wouldn't have minded seeing a bit more questioning about his socially conservative stances.

  • Kroneborge||

    Flat tax is more bull, without simplying the tax code. The Fair Tax is the way to go. Save the country 200 BILLION each year in tax compliance costs.

  • ||

    No Tax > Consumption Tax > Flat Production Tax > Progressive Production Tax

    Any move away from progressive tax is positive.

  • John Roberts||

    Forbes doesn't grasp what has happened to the global economy. Critiquing govermental responses, whether by the US or Iceland or China, without first discussing root causes is mindless. The root cause of the global recession is China. Specifically, China's policy of pegging the yuan to the dollar and relying on an export-driven growth model plus accumulation of foreign reserves. Read Martin Wolf's new book, "Fixing Global Finance," and Krugman's recent admission in the New York Times. Don't give me ideological drivel about free trade (I'm a libertarian, but as Forbes correctly points out regarding health care, some markets aren't free) benefitting the globe. Here's the truth: China is still a command economy, run by a dictatorship. And there is no way the developed world benefits by a system where multinationals can make capital investments and create factories or do their manufacturing in China, which lacks a century of development of environmental, labor, and workplace safety laws, and then ship the products back to our markets! We hit the tipping point in this game in February 2007. That was when declining middle class incomes hit rising middle class household debt burdens, and the bubble popped. It took until later that year to hit the stock market, and then rippled through the mortgage and credit markets in 2008 -- causing the government bailouts. Global trade is now down to its lowest level since the Great Depression. The old paradigm of free trade for everyone is dead. Kaput. But our policymakers don't get it yet. Read the backstory on my blog at www.FreeingTibet.com, go to Tibet Blog, and you'll find lots of links to thoughtful economic analysis on the topic.

  • oh no not this again||

    How telling that reason would feature an interview with a faux market authoritarian...tsk tsk.

  • John Roberts||

    I was working on a U.S. Senate race in 1994, when Giuliani tried to persuade my candidate, a Republican, to break from the ticket and endorse Mario Cuomo's reelection. This was in a private, off-the-schedule book meeting in Gracie Mansion. Instead we endorsed the challenger, George Pataki, who went on to win the gubernatorial race. But my candidate lost to Moynihan, a very strong incumbent. What was Giuliani's motive for crossing party lines to back Cuomo? I suspect some kind of deal had been made, and Giuliani had his eye on running for governor himself and just didn't want Pataki to win it. The guy's only principle seems to be self-advancement.

  • Gene Berkman||

    I get the impression that Giuliani endorsed Mario Cuomo for re-election as a payback to Ray Harding, boss of The Liberal Party, who had been crucial to Giuliani's election as Mayor in heavily Democratic New York City.

    Also, he might have seen Pataki as a rival for power in the Republican Party.

  • ||

    I WISH the Obama Admin. hired this guy as an economic adviser.Unfortunately he has a bunch of Goldman Sachs retreads that have bled us. We need more free market geniuses like Mr Forbes directing our policies and instead we get these radical socialistic Government take over of everything. I feel really bad for the next generation.

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  • ||

    Too many flat taxers are for a tax of 17%. That is way too high 10% would be more like it.

  • Christian Louboutin||

  • abercrombie milano||

    My only point is that if you take the Bible straight, as I'm sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won't get the full deal by just doing regular skill english reading for those books. In other words, there's more to the books of the Bible than most will ever grasp. I'm not concerned that Mr. Crumb will go to hell or anything crazy like that! It's just that he, like many types of religionists, seems to take it literally, take it straight...the Bible's books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on...the Bible's books were written by people with very different mindsets...

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